California Can’t Afford Prop 40, the Reckless Wealth Tax Experiment

A study prepared by Stanford University economists found Prop 40 will drive companies and wealthy residents out of state, costing $25 billion in lost revenue.

• These residents create new businesses, drive economic growth and already pay nearly half the income taxes that fund critical state programs.
• If they leave, their departure will blow a huge hole in our budget, threatening core services like healthcare, schools and public safety and force other taxpayers to make up the difference.

Prop 40 isn’t a “wealth tax” - the special interests behind the measure included a hidden provision that gives the State Legislature the power to amend the measure without voter approval.

• This deceptive provision could allow Sacramento politicians to expand the policy to tax the assets of ALL Californians - your savings, your home equity, your small business and even your retirement funds.

Prop 40 would be the first measure in California history to tax savings and retirement accounts - a dangerous precedent in a state with high taxes and high cost of living.

• If Prop 40 passes, it will inevitably be expanded to tax more Californians’ retirement savings.

The state government already taxes our income when we earn it. Prop 40 amends the State Constitution, allowing bureaucrats to tax your hard-earned money regardless of if you’re saving and simply because its sitting in your savings or retirement accounts - that’s double taxation.

Prop 40 seeks to raise billions of dollars, but has no accountability, transparency or oversight provisions to ensure taxpayer dollars are spent as intended.

• State government spending is already up 79% since 2019 – without delivering better results on key issues like homelessness. There’s nothing in Prop 40 that ensures funding will be managed any differently.

Even worse, Prop 40 allows billions of tax dollars to flow directly to health insurance companies and CEOs with no guarantees families struggling with healthcare costs get a dime.

Prop 40 contains significant constitutional and legal vulnerabilities that will delay implementation and revenue collection for years – or prevent the measure from taking effect altogether.

• California will be taking a massive hit to long-term revenue, with no guarantee any of the near-term revenue will ever show up.
• Prop 40 is already causing serious harm to California’s economy and state revenue – all for a reckless gamble with little chance of paying off.

Prop 40’s authors drafted the measure to exempt the proposal from Proposition 98, California’s longstanding voterapproved constitutional protection for guaranteed school funding.

• Independent analysis conducted by former state finance officials found Prop 40 will shortchange classrooms and students roughly $3 billion annually.

Prop 40 also exempts itself from Proposition 4, which established the state’s spending limit and requires excess revenues to be returned to taxpayers.