Saying It Out Loud October 2026, By Pat Soldano and Tim Schultz

Four States and Three Myths Surrounding America’s Growing Wealth Tax Battles

Next month voters in four states will be weighing the prospect of imposing, or killing, Wealth Taxes, and either way those votes will affect family-owned businesses.

There are many myths surrounding Wealth Taxes too, or savings penalty taxes, not the least of which is that they will raise tax funds and only hurt the wealthiest.

States with major measures on the ballot are California, Colorado, Iowa, and Washington.

California has two big propositions pending, Props 40 and 42. The proposition with the most votes will set the state’s future tax course.

You may have heard of the big one, Prop 40, “The Billionaire Tax,” which proposes a one-time 5% tax on most assets over $1 billion. It’s driving some of the state’s biggest job creators, and families of family-owned businesses, out of the state.

Proposition 42 is the counter measure, which would prohibit any new taxes.

In Colorado, Initiative 195 was written to replace the state’s 4.4% flat income tax with graduated rates ranging from 3.7% to 8.4% and allocate the additional revenue to education and healthcare.

But the state also has a counter measure on the ballot, Initiative 232, which offers voters a chance to limit the state’s individual and corporate income tax rates to 4.4% of federal taxable income.

Iowa is going the other way.

Iowa’s hardworking family-owned businesses can look to Amendment 1 to help stop any new Wealth Taxes, savings penalty taxes, or asset seizure taxes from being imposed.

If passed, Iowa’s Amendment 1 requires a two-thirds vote in each chamber of the state legislature to increase individual or corporate income tax rates or create any new state income tax.

In a similar way, Washington state’s Income Tax Initiative bill wants to nullify its new 9.9% Wealth Tax on individual and household income above $1 million and prohibit state and local governments from imposing taxes on individual income.

Wealth Tax Myths

Wealth Taxes are based on some fundamental myths.

For example, in California, Myth Number 1 is that Prop 40 is a commonsense measure that will help address federal funding cuts.

The fact is Prop 40 is a flawed tax scheme.

It is not a reliable solution to federal funding cuts. Economists from Stanford University found the measure will cost the state $25 billion over time, potentially forcing cuts to education, healthcare, and every other program that relies on general fund revenue.

Prop 40, like other state Wealth Tax proposals, also faces significant legal and constitutional challenges that could delay implementation for years or prevent it from taking effect altogether, but in the process will drive business and families out of the state.

Myth Number 2: The measure is an emergency one-time tax on billionaires and will finally make billionaires pay their fair share.

Fact: Prop 40 won’t be a “one-time” tax and even its authors admit it is an experiment that may become permanent. When the money runs out, there’s no plan to ensure politicians won’t be back with a different tax on someone else, such as family-owned businesses.

Economists warn measures like Prop 40 would discourage investment and drive wealthy taxpayers, family businesses, and families of family-owned businesses, who pay nearly half of state’s income taxes, out of California.

In fact, Prop 40 will likely permanently reduce the state budget revenue that fund schools, healthcare, infrastructure, and public safety, forcing other taxpayers to make up the difference.

Myth Number 3: No one except billionaires will be affected by Prop 40.

The fact is Prop 40, like many such Wealth Tax bills, is not just a tax on billionaires.

The measure contains a loophole and creates a new tax structure giving the state legislature the ability to amend its provisions without a vote of the people.

This means lawmakers could expand the tax beyond billionaires to additional assets and taxpayers, like family businesses. Prop 40’s ability to generate new and higher taxes is inevitable.

The simple fact is, Prop 40 is not a golden idea for the Golden State, or any state in the union.