California voters rejected a proposed wealth tax that would have meant a one-time influx of billions to the state, but could have caused billionaires to flee the state.
The ballot measure, one of the few housing issues on Californians’ minds, is projected to narrowly fail by the Associated Press, with a 53% majority voting against the measure, a week after Election Day. Proposition 40 It would create a one-time 5% wealth tax on individuals with net worth above $1 billion.
The Service Employees International Union – United Health Workers West, which supports this measure, said. could be an offset cutting federal funding. He estimated that the one-time tax could raise $100 billion in one-time revenue.
But the measure could have an effect about 200 peopleand billionaires in the state have put significant money into fighting it. The California Budget and Policy Center estimates their combined wealth at $2 trillion. Proposition 40 excludes the determination of an individual’s net worth of real estate.
State leaders say the tax could prompt some of those wealthy people to flee the state and take their spending with them. The National Taxpayers Association Foundation estimates that California could raise $40 billion from the tax. But if the wealthy leave, they could lose $25 billion in other taxes.
the governor Gavin Newsom opposed the measure. “It’s going to fail, there’s no question in my mind,” Newsom told the New York Times, noting that several wealthy individuals have begun moving their assets out of the state.
Co-founder of Palantir and PayPal Peter Thiel and Google co-founders Larry Page and Sergey Brin all reportedly moved some of their assets to Florida. On Tuesday, voters in that state approved a measure that would reform the property tax system and potentially make it more attractive.
However, Meta CEO Mark Zuckerberg He promised to stay in California, where he spent more than 112 million dollars to build a megacompound in Palo Alto. Earlier this year, Zuckerberg agreed with Meta’s board to stay in California regardless of the outcome of Prop 40. If the measure had passed, it would have faced a potential tax bill of about $12.5 billion.
A wealth of controversy
The taxes raised by Prop 40 would go to health care, education or food aid. But the state legislature would have authority determine how those funds are used.
President of the California Association of Realtors Tamara Suminski At the election forum held last month, he said that he was against this measure. CAR is concerned about the potential loss of tax revenue and the state’s economic competitiveness, he said.
“Prop 40 is just a bad idea” Jennifer BarreraPresident and CEO of the California Chamber of Commerce said at the event. “Billionaires are individuals who have the ability to move quickly, they have the ability to live out of state, they don’t have to be in California. However, if they live here, they pay a large amount of income into our general fund.”
Two other items on the ballot, Proposition 41 and 42, both aim to block or oppose Proposition 40, but their language could have broader implications, Barrera said.
But even if Proposition 40 passes, he said, it would invite years of litigation Joe Bishop-HenchmanExecutive Vice President of the National Taxpayers Union Foundation. Prop 40 applies to the California-based billionaire’s worldwide holdings, raising constitutional challenges.
And then there’s the matter of actually calculating the net worth. Wealthy individuals own assets that can be difficult to value, such as patents, artwork, and stakes in private companies. So it will likely take many years of expensive legal proceedings to determine how much tax they will be owed.
“The Franchise Tax Board currently has no infrastructure to assess these types of assets,” Bishop-Henchman said. “The valuation of such assets will lead to years of costly litigation on both sides and the creation of a vast and expensive administrative apparatus for a supposedly ‘one-off’ tax.”
Californians decide other ballot issues
Meanwhile, Californians voted on several other measures. Voters passed Proposal 1 Allowing California It released $11.25 billion in bonds to support housing affordability programs. Co-chairs of his organizational campaign Chione Flegal and Ray Pearl called the win “a brilliant show of support for affordable housing.”
Voters also approved Proposition 37creates a $25 billion loan program for middle-income buyers to purchase new homes. Realtor.com Economist Joel Berner said it could be a boon for new home sales. But he cautioned that it would not affect more expensive parts of the state.
“The complicating factor here is that new construction homes in California’s major metro areas are under $1.5 million, and the ballot measure does nothing to address the supply of these homes, only increasing the demand for them,” Berner said.
“Proposition 37 has the potential to help potential California homebuyers, but only if they can find new homes to buy,” he said.
The California Association of Realtors, a major proponent of Proposition 37, welcomed the outcome.
“This measure will help create more housing, provide low-down payment options, and give teachers, nurses, firefighters and other hard-working Californians a better opportunity to own a home in the communities they serve,” Suminski said. “We look forward to working with stakeholders to implement Proposition 37 and fulfill its promise for California families.”
But voters rejected the controversial proposal Proposition 45. California would set environmental review timelines for some projects under the Environmental Quality Act, or CEQA.
California earned an F grade on the Realtor.com® State-by-State Housing Report Card. It tracks how effectively each state balances affordability and new construction.
