California’s top 1% pay nearly half the state’s income taxes-Prop 40 critics say it may hit everyone

Key Points:

• California’s Proposition 40 proposes a one-time 5% tax on residents worth over $1 billion, aiming to raise $100 billion to offset federal health spending cuts, with backing from the Service Employees International Union.
• The measure has sparked intense debate, with supporters including Nobel laureate economists who argue it could curb wealth inequality and opponents warning it may extend beyond billionaires and harm startups due to taxation on unrealized capital gains and private stock.
• Legal experts note that while the state legislature can amend ballot measures post-approval, changes must align with the original intent, and courts have both upheld and struck down such amendments in the past.
• Political and business leaders are divided: Governor Gavin Newsom opposes Prop 40, while Representative Ro Khanna supports it with reservations; notable figures like Nvidia CEO Jensen Huang accept it, whereas Google cofounder Sergey Brin has donated heavily to oppose it.
• Competing ballot measures, Proposition 41 and Proposition 42, seek to limit or prohibit new taxes like Prop 40, and a recent poll shows all three propositions currently enjoy majority voter support in California.