By Amara Osei

California’s Proposition 40 appears headed for rejection, but a $300 million No campaign may have strengthened the political case for another wealth tax.

The final count remains outstanding, and Dr Kristian Niemietz bases his assessment on the votes counted so far. Unless the uncounted ballots depart radically from the established pattern, the measure should lose at the ballot box.

What did Proposition 40 propose?

Proposition 40 would have imposed a one-off 5% tax on net wealth above a $1 billion threshold. Liability would have covered people who were California residents at the beginning of 2026, so leaving the state after that date would not avoid the charge.

“The opposition may win the referendum, but lose the political narrative,” Niemietz wrote. He describes the projected outcome as a poisoned chalice for opponents because the result could embolden wealth-tax supporters rather than discourage them.

Who financed the No campaign?

California hosts about 260 billionaires, and the No campaign drew heavily on donations from a prominent subset of them. Google co-founder Sergey Brin contributed more than $100 million, while other wealthy donors lifted the campaign budget to about $300 million.

That spending enabled the No side to outspend the pro-tax campaign by almost 10 to one. Wealthy donors possessed both the resources and a direct financial interest in defeating the levy, while people unlikely to pay it had little reason to fund the opposition.

Opponents also contend that a wealth tax’s economic costs eventually fall on the wider public, rather than only or primarily on the billionaires transferring wealth to the tax office. Persuading voters requires sustained explanation of tax incidence (who ultimately bears a tax), second-order effects (knock-on economic consequences) and unintended consequences.

Winning that argument would require a year-long education campaign, but wealthy donors supplied the resources to finance the No side’s message. Their concentration creates a long-term cost: it reinforces the impression that financial self-interest is the only credible reason to oppose wealth taxes, strengthening the case made by more populist proponents.

What drives the slopulism argument?

Niemietz has debated wealth taxes during roughly the past 18 months on television, radio and at university debating societies. He found that supporters hold varied motives, with more fair-minded advocates accepting serious, legitimate economic objections while treating them as a reason for careful design rather than abandonment.

He calls the more rigid narrative Polanski-style slopulism, a contest in which politics pits pure people against rapacious, extractive and divisive billionaires. The account portrays billionaires as impoverishing the public, then using their wealth for divide-and-rule tactics, to distort public debate and to foment hate and division.

In this framing, economic objections merely disguise class interests, leaving opponents cast as plutocrats defending ill-gotten gains or mercenaries serving wealthy interests. The narrative leaves little room for the legitimate economic arguments that even sympathetic supporters acknowledge.

What does the rejection change?

Had Proposition 40 passed, its supporters would have faced the practicalities of implementing the levy and, eventually, a backlash from disappointed campaigners. A defeat instead lets tax supporters present billionaire spending as subversion of democracy and the rejection itself as evidence that a wealth tax is necessary.

“I almost wish the other side had won,” Niemietz wrote, despite his criticism of wealth taxes. His conclusion is that opponents have reached the right result for the wrong reason: they appear to have won the referendum, but their donor-dependent strategy may have weakened the broader argument against wealth taxation.

Dr Kristian Niemietz is the outgoing editorial director of the Institute of Economic Affairs. He is the author of “Fool’s Gold: The case against the wealth tax, and suggestions for alternatives.”