SACRAMENTO, CA — This week, the No on 40 coalition is fact-checking the false and misleading claim that Proposition 40 will solve California’s budget problems. In fact, the measure will actually exacerbate the state’s fiscal challenges by eroding the tax base, blowing a $25 billion hole in the state budget, jeopardizing more stable sources of revenue, earmarking one-time revenue for healthcare challenges that require ongoing funding, and shortchanging all of the state’s other core programs and services, from schools and public safety to housing and infrastructure.
KEY QUESTIONS: How can proponents claim to fix the state’s fiscal challenges while blowing a hole in the budget?
If proponents are committed to funding education, why does Prop. 40 intentionally bypass Prop. 98?
What is the plan to prevent massive cuts to healthcare services when funding runs dry?
How will Prop. 40 deliver on its promises when the state’s tax base is already eroding?
THE CLAIM: Proposition 40 will solve California’s budget problems.
THE FACTS:
Prop. 40 will not provide the funding it promises. According to Stanford University research: “the one-time levy would collect approximately $40 billion in wealth tax revenue, less than half of the roughly $100 billion projected by proponents.”
California’s tax base is already starting to crumble. At least six billionaires departed California before January 1, 2026 to avoid this tax. Notably, the top 1% of California earners contribute 40-50% of the state’s income tax revenue.
This will blow a massive hole in the state budget. The departure of these individuals alone is estimated to remove more than half a trillion dollars, or nearly 30% of aggregate billionaire wealth, from the tax base. Once lost income tax revenue is considered, Proposition 40 would leave the state worse off by an estimated $25 billion.
Education, healthcare, public safety, and other priorities face cuts as a result. As the state’s non-partisan Legislative Analyst’s Office put it, when the state’s top innovators, investors, and entrepreneurs depart “this would mean less money for the state’s general budget that supports education, health care, prisons, and other services.” The California Policy and Budget Center also warns that beyond these departures, “the bigger concern for the state is the potential impact on ongoing state income tax revenues, which could put a strain on the state budget in the future.”
It threatens other measures on the ballot that help stabilize state finances. Prop. 40 is creating uncertainty for other ballot measures that provide the sort of durable, reliable, long-term funding California needs to sustain critical public services. This is driving voter confusion and risks the state’s long-term fiscal health.
It earmarks unstable, one-time revenue to programs that require stable, ongoing funding. Building services up with one-time revenue only to slash them when funds run dry is cruel to Californians and it’s bad policy. As the California Medical Association put it: “California’s health care system cannot be built on temporary revenue spikes or uncertain funding streams. Patients, providers, and health care programs need reliable, sustainable funding, not a short-term fiscal fix that could ultimately reduce overall state revenues and make future budget shortfalls more severe.”
It shortchanges California’s priorities. California has enormous education, infrastructure, public safety, housing, and other needs, yet this measure earmarks 90% of funds for just one purpose. As Governor Gavin Newsom has pointed out: “There is nothing for housing, nothing for childcare, nothing for public safety workers who must answer 911 calls, and nothing for our public universities that have powered California’s economy for a decade.”
While purporting to prioritize education, it bypasses school funding requirements. Prop. 40 exempts itself from Prop. 98, bypassing decades-old, voter-approved constitutional protections for school funding — shortchanging students by billions of dollars every year. As the Legislative Analyst’s Office explains: “Other state laws that require some tax revenue to be used in certain ways, like spending on schools and building the state’s rainy day savings, would not apply to this money.”
WHAT THEY’RE SAYING:
California Governor Gavin Newsom: “I understand the anxiety driving the wealth tax proposal in California. But I’m voting no because this measure dedicates almost all of the revenue it raises to a single category of state spending. It ignores our public schools, as the California Teachers Association has rightly pointed out, by failing to provide sustainable funding that our communities, parents and children deserve. It turns a blind eye to safety-net clinics and reproductive healthcare providers that Planned Parenthood has fought for decades to protect…This is not how we should set California’s budget priorities.” (June 26, 2026)
Former U.S. HHS Secretary & Democratic Candidate for Governor Xavier Becerra: “You don’t need tax policy to be a one-time shot because you need consistent, predictable revenue in order to manage a budget the size of the state of California…I was for 20 years on the Ways and Means Committee in Congress — a tax policy writer. Tax policy has to be predictable, it has to be stable, and it has to understand that it’s interconnected with everything that goes on.” (March 11, 2026)
California Teachers Association: “After thorough review and democratic debate about [Prop. 40], our State Council of Delegates — 800 educator representatives from throughout the state — determined that this policy will not provide the sustainable and long-lasting funding that our schools and communities deserve.” (June 7, 2026)
Planned Parenthood Affiliates of California President & CEO Jodi Hicks: “While Planned Parenthood Affiliates of California recognizes the need to address the devastating impacts of H.R. 1 and ongoing attacks on health care, the initiative’s uncertain impacts on the state budget and lack of specificity on health care allocations will do more harm than good in the long term.” (June 4, 2026)
California Professional Firefighters President Darrell Roberts: “California Professional Firefighters stand firmly against Proposition 40 because when you gamble with the finances of our state and local governments, you gamble with public safety. Given California’s mounting fire danger and ongoing fiscal challenges, we need smart, durable solutions, not unproven risks.” (July 17, 2026)
California Primary Care Association President & CEO Francisco Silva: “It’s unfathomable that proponents of [Prop. 40] are claiming their efforts are intended to help Medi-Cal, while at the very same time they are advocating for policies that will decimate the very safety-net and workforce that Medi-Cal patients rely on. Proponents have a long history of promoting flawed and deceptive proposals that actually harm patients. This measure is no different.” (June 4, 2026)
California Medical Association President Rene Bravo, MD: “California physicians support a strong Medi-Cal program, but [Prop. 40] is the wrong way to address the state’s health care funding challenges and was developed without input from the physicians, hospitals, clinics, and other providers who care for Medi-Cal patients every day. [Prop. 40] relies on an unstable revenue source, provides no clear accountability for how the money would be spent, and does not offer the long-term funding solution that patients and health care professionals need.” (June 4, 2026)
California Children’s Hospital Association President & CEO Ann-Louise Kuhns: “California’s children deserve a stable, sustainable health care system. The one-time tax proposed by Prop. 40 doesn’t provide that stability. Worse, the measure jeopardizes existing revenue that children on Medi-Cal, including those with the most medically complex conditions, rely upon for their care.” (September 14, 2026)
Former California Department of Finance Director Keely Martin Bosler and Former Chief Economic and Business Adviser to the Governor Lenny Mendonca: “While this systemic federal funding cut demands a response, a one-time levy on 200-plus people is neither a durable nor a predictable solution. The fundamental flaw of the California proposal is its foundational shift away from the state’s established income tax system. It proposes a completely new method of taxation based on the valuation of all assets, not just realized income. This is a massive, unprecedented leap for a state…This fundamental departure from the realization principle of taxation is far more likely to result in the outmigration of high-wealth individuals than it is to make headway in effectively addressing the state’s fiscal needs.” (April 3, 2026)
California YIMBY CEO Brian Hanlon and Director of Industry Partnerships Noah Ornstein: “[Prop. 40] is poorly-designed: It will likely harm housing production by discouraging investment in California. It will likely harm overall tax revenues by driving out the taxpayers who already pay the most taxes. It earmarks most of the funds for a very narrow set of pre-defined uses. It is a one-time windfall tax that will not solve longer-term revenue problems, and would exacerbate them by creating future shortfalls.” (June 16, 2026)
CA/HI State Conference NAACP President Dr. Rick L. Callender, Esq.: “Proposition 40 is the wrong way to address the challenges facing our state. In fact, it will make many of our problems worse, diverting billions of dollars from public schools and putting additional pressure on the budget that could squeeze funding for other essential public services. California should pursue solutions that strengthen public education and protect our fiscal stability, not create new pressures that ultimately fall hardest on our most vulnerable communities.” (August 26, 2026)
State Building & Construction Trades Council of California President Chris Hannan: “[Prop. 40] will drive away capital when we need it the most, threatening construction jobs, our infrastructure, and California’s future. When investment leaves California, critical housing, transportation, school, and water projects leave with it. We can’t let that happen.” (June 18, 2026)
California State Legislators: California State Legislators: “While well-intentioned, this measure will blow a massive hole in our state budget in the years ahead and undermine our ability to sustain investments in the very priorities Prop. 40 claims to support… Prop. 40 would leave California with fewer resources and less flexibility to respond to economic downturns, natural disasters, public health emergencies, and other unforeseen challenges.” (August 17, 2026)
In recent weeks, the No on 40 coalition has fact-checked claims Prop. 40: is just a one-time tax, won’t impact California’s economy, and will address California’s healthcare needs.