Wealth Tax News – 9/4/2026

This week’s wealth tax developments centered on California’s Proposition 40, as Rep. Ro Khanna (D-CA) defended it as a pro-business investment in healthcare and education while critics warned of burdens on startup founders, broader taxation, and economic distortions.

The measure continued to divide Democratic officials and voters amid support and an advertising campaign backed by more than $100 million from Sergey Brin. Elsewhere, Washington debated whether its new millionaire tax would cause high-earner migration, and Cook County voters prepare to consider a nonbinding referendum supporting a 3% tax on residents earning more than $1 million.

Please find summaries of relevant articles with web links below. Please reach out to any member of your Brownstein National Tax Policy Group team with questions or to set up a meeting.

California Wealth Tax Initiative 2026: Latest Polls – The New York Times
The New York Times has set up a page on their website tracking recent polling on the California wealth tax proposal.

Federal

California’s Pro-Business Wealth Tax Proposition – WSJ
Rep. Ro Khanna (D-CA) argues that Prop 40, is both a fairness measure and a pro-business investment. He argues that the proposal would help offset federal Medicaid cuts, strengthen the state’s workforce through human-capital investments, and curb excessive concentrations of economic and political power without meaningfully diminishing innovators’ incentives to create and build companies.

Ro Khanna Gets a Wealth Tax Education – WSJ
The Wall Street Journal Editorial Board criticizes Rep. Khanna’s support for Prop 40. The Board argues that it would especially burden startup founders whose wealth is tied up in illiquid company shares. The Board also faults Rep. Khanna’s suggested government-loan mechanism, under which founders could pledge shares to finance their tax bills, as financially circular and potentially punitive, since founders could face tax liabilities if their companies fail or lose ownership stakes if they cannot repay the loans. It further argues that the prosect of state ownership could deter venture investment, distort business decisions, and encourage high-income residents to leave California.

Taxing the rich cracks open the Democratic coalition – POLITICO
Democrats in California and New York are increasingly united around the goal of raising more revenue from wealthy residents, but are split over whether aggressive state-level wealth taxes are sound policy or political strategy. California’s Prop 40 has fractured party leaders, labor groups, and progressive allies. Supporters argue it is needed to offset federal Medicaid cuts and respond to inequality, while Gov. Newsom, Xavier Becerra, and others favor a federal approach or alternative taxes because of concerns about its design, taxpayer flight, and effects on other revenue measures. In New York, Gov. Kathy Hochul (D) faces similar pressure from Mayor Zohran Mamdani (D) and the Democratic left to pursue higher taxes on affluent residents, while business groups warn that reliance on high-income taxpayers makes the state vulnerable to outmigration.

California

California Wealth Tax Would Spare No One – WSJ Op-ed
David Henderson argues that California’s Prop 40, could ultimately affect far broader groups of taxpayers. He argues that the initiative’s amendment provision would allow the Legislature, with a two-thirds vote, to expand wealth-tax provisions in pursuit of funding healthcare, education, and food assistance, potentially overriding existing constitutional limits. Drawing on the historical expansion of the federal income tax from a levy on high earners into a broadly applicable tax, Henderson warns that the measure could become a “stealth tax” on Californians well below billionaire status while also discouraging investment and wage growth.

The DSA divide in LA over Nithya Raman – POLITICO
A recent Televisa/Univision poll found that Prop 40 has majority support among Latino voters, with 58% favoring the measure. However, more than half of those supporters characterize their backing as tentative—either “probably” voting yes or leaning yes—and another 8% remain undecided. The survey identified similar fluid opinion on Props 44 and 45, leading Global Strategy Group to conclude that targeted, relevant Spanish-language outreach could materially influence voters on both sides of the measures.

On the fence over Prop. 40 – POLITICO
Prop 40 campaign has drawn support and opposition from a relatively limited group of prominent officials, while many major state Democratic figures remain publicly uncommitted. Gov. Gavin Newsom (D), gubernatorial candidate Xavier Becerra (D), and mayors Matt Mahan (D) and Daniel Lurie (D) oppose the proposal. Reps. Khanna, Maxine Waters (D-CA), and Judy Chu (D-CA) support it. Sens. Adam Schiff (D) and Alex Padilla (D), former Vice President Kamala Harris (D), and most of California’s congressional delegation have yet to take a definitive position. It polls near 50%, has high voter awareness and progressive support, but faces organized opposition.

The $18B question – POLITICO
John O’Farrell, a former Andreessen Horowitz venture capitalist, has emerged as a supporter of Prop 40, and contributed $25,000 to the Yes campaign. O’Farrell, who recently criticized major AI-industry political spending as harmful to democracy, contrasts sharply with his former firm, its founders Marc Andreessen and Ben Horowitz, and other technology leaders who have been vocal opponents against the billionaire’s tax.

Pelosi avoids billionaire tax vote as wealth tax turns toxic in SF – SF Gate
Prop 40 is shedding light on a sharp divide between Democratic voters and party leaders, particularly in San Francisco. While polling shows strong support among Democrats, renters, and younger voters, the San Francisco Democratic Party voted to oppose the measure despite the state party’s narrow endorsement. SF officials including Speaker Emeritus Nancy Pelosi (D-CA), Sen. Scott Wiener (D), and other San Francisco politicians, have avoided or declined firm public backing, reflecting the proposal’s political sensitivity amid strong opposition from technology and finance leaders.

Tech Leaders Haven’t Stopped the Billionaire Tax So Far. Will Ads Work? – The New York Times
Google co-founder Sergey Brin has emerged as the leading opponent to Prop 40, contributing more than $100 million to an effort that has reserved over $90 million in advertising and supports two competing ballot measures. Other prominent donors have added tens of millions more. Supporters, led by SEIU–United Healthcare Workers West, have reserved only about $8,000 in television advertising and instead plan to rely on Democratic Party and labor endorsements, grassroots organizing, social media, and voter outreach to promote the tax to offset health-care cuts and address wealth inequality.

Washington

Are WA millionaires really leaving to avoid tax? – The Spokesman Review
Washington’s recently enacted millionaire tax has prompted fears that high-income residents and business owners may move to lower-tax states, becoming a central issue in the campaign over Initiative 645, which would repeal the tax. Critics cite anecdotes, higher luxury-home listings, and concerns about Washington’s broader tax and regulatory climate. Supporters note that research on other state tax increases generally finds limited migration effects. Cristobal Young, a sociologist at Cornell, estimates the tax would produce a net loss of about 1.9% of Washington’s roughly 25,000 affected households, or approximately 475 taxpayers.

Ferguson hopes ‘Millionaires Tax’ can help state meet school budget shortfalls – Yakima-Herald Republic
Washington Gov. Bob Ferguson (D) said the state’s millionaire tax could help preserve or increase K–12 education funding as districts confront declining enrollment, rising costs, and budget pressures. With the state also facing significant operating and transportation shortfalls, Gov. Ferguson did not commit to specific school-spending levels before releasing his proposed budget in mid-December, but said the new revenue would support substantial education investment, including universal school meals. He also highlighted education-policy priorities for the next legislative session, including a statewide effort to limit student cellphone use by fall 2027 and a proposal to require high-school seniors to complete the FAFSA.

Illinois

Cook County to add millionaire advisory question to Nov. ballot – The Chicago Tribune
In Illinois, Cook County voters will decide in November whether to endorse a nonbinding referendum urging Illinois to adopt a 3% tax on residents with annual incomes over $1 million. If lawmakers and voters later approved the required constitutional amendment to replace Illinois’s flat-income-tax system. Half of the resulting revenue would go toward residential and commercial property-tax relief and half toward public education. Supporters cite prior polling showing strong support and estimates of nearly $4 billion in first-year revenue. They also argue the measure would improve tax fairness and fund public priorities. Opponents warn it could raise marginal tax rates for some small-business owners, discourage hiring and wage growth, and harm the state’s economic competitiveness.

Other

A Lesson on Wealth Taxes From Charles Dickens – WSJ
Allysia Finley argues that wealth taxes, like England’s former window tax, may appear progressive but can produce unintended economic and social harms. She describes how the window tax led property owners to brick up windows and reduce ventilation and light, while generating less revenue than expected. Drawing a parallel to California’s proposed 5% tax on billionaire wealth, Finley says that taxing illiquid, paper-valued assets would spur avoidance strategies, reduce investment and job creation, invite political favoritism in defining taxable wealth, and potentially shift higher tax burdens onto other residents.