Who and what would be taxed
Proposition 40 would impose a one-time tax equal to 5% of net worth on people who were California residents on January 1, 2026 and whose net worth exceeded $1 billion. The Legislative Analyst says real estate, pensions and retirement accounts generally would be excluded. The payment would be due in 2027, with a costlier five-year payment option.
That is different from adding five percentage points to every year's income-tax rate. Wealth measures assets minus debts at a point in time; income measures earnings during a period.
Where the money would go
The measure directs 90% of the money to public health-care services. The remaining share would support education, food assistance and administration. The new revenue would be exempt from constitutional school-funding and state spending-limit rules that normally apply to some revenues.
The analyst estimates temporary collections in the tens of billions of dollars, spread over several years, but emphasizes that the amount and timing are unusually uncertain because stock values change and taxpayers could restructure assets or residency.
The ballot contains a conflict voters should notice
The official guide warns that Propositions 41 and 42 may conflict with Proposition 40. If either competing measure passes with more yes votes, a court could prevent Proposition 40 from taking effect even if it also wins a majority. The guide does not say that result is automatic; it describes a potential legal interaction.
The analyst also estimates a possible continuing loss of less than $1 billion a year in income-tax revenue if affected taxpayers change behavior. That forecast is not a finding that a specific person will leave California.
Sources and further reading
Secretary of State: Proposition 40 summary ↗