California voters have rejected Proposition 40, the state's proposed one-time tax on billionaires, the Associated Press reported on Monday. The measure, which would have been the first tax of its kind in the United States, failed after one of the most expensive ballot campaigns in the state's history.

The proposal would have imposed a one-time 5% tax on the wealth of California residents worth more than $1 billion. It would have applied to anyone who was living in the state on 1 January 2026, including those who have since moved away. Backers, largely labour unions, said it would have raised as much as $100 billion over five years, with most of the money directed to healthcare, including Medi-Cal, the state's Medicaid programme for low-income residents.

About 53% voted against the measure

According to the latest tally from the California Secretary of State, the measure was failing statewide on Monday night, with 5,789,026 votes against it, or 52.9%, and 5,159,356 in favour, or 47.1%. San Francisco was an exception: voters there backed the proposition by roughly 56% to 44%.

The result is a setback for supporters who presented the tax as an answer to inequality and as a way to replace federal healthcare funding cut under President Donald Trump's tax legislation last year. US Senator Bernie Sanders was among the measure's most prominent champions, and its backers argued that a tiny number of very wealthy residents could fund public services for millions.

Newsom opposed it as billionaires spent heavily

The measure split California's Democratic leadership. Governor Gavin Newsom came out against it, arguing that it would damage the climate for entrepreneurs and technology companies in the long run. Opponents, led by some of the state's wealthiest residents, argued that the tax would drive billionaires out of California and drain a steadier source of income-tax revenue.

Money dominated the campaign. The Associated Press reported that the "no" side raised roughly ten times as much as the "yes" side. Spending against the measure included as much as $379 million from billionaires, including Google co-founder Sergey Brin. Brin and at least 11 other billionaires contributed a collective $269 million to a political action committee, Building a Better California, which poured more than $300 million into campaigns opposing the tax.

Supporters pointed out that California has a little over 200 billionaires holding a combined total of about $2 trillion in wealth, while the state takes in only about $3 billion a year from the group, roughly 1% of its total revenue. Critics countered with an analysis, contested before the vote, which claimed the tax would lose the state money over time as wealthy residents left.

Backers signal a return in 2028

The defeat does not necessarily end the debate. The Associated Press reported that backers of the measure said they could put a similar tax back on the ballot in 2028. Voters were also deciding two competing measures, Propositions 41 and 42, designed to restrict the state's ability to impose wealth taxes in future.

For now, California will have no dedicated billionaire wealth tax, and the question of how the state pays for healthcare and other public services after federal funding cuts remains open.