# Prop. 40 won’t solve the healthcare emergency — it will just leave California worse off > Source: > Published: 2026-08-31 07:09:18+00:00 **Getting your** [Trinity Audio](//trinityaudio.ai)player ready...According to supporters of Proposition 40, recent federal funding cuts have created a crisis in California’s healthcare system that is pushing it closer towards collapse. They estimate that the measure, a one-time 5% wealth tax on the state’s billionaires, would raise about $100 billion over 5 years to keep our healthcare system afloat in the short-term. About 90% of the revenue would go to healthcare while the remaining 10% would be directed at public education and food security programs. This would be the first time that any state in the United States has levied a tax on unrealized assets like ownership in a business, securities, collectibles, and art. Last week, members of the editorial board and I spoke with backers of the measure, including Dave Regan, president of the SEIU-UHW, and UC Davis law professor Darien Shanske. Right off the bat, the estimates that Prop. 40’s supporters have been promoting are suspect. The “$100 billion” sum they emphasize appears to have been calculated by taking the net worth of California’s billionaires, assuming that billionaires will be able to avoid about 10% of that tax bill by either moving or shifting assets, and applying the 5% rate to that. The problem is that, according to a [report](https://papers.ssrn.com/sol3/papers.cfm?abstract_id=6340778) by the Hoover Institution, the proposition’s authors failed to account for lost income tax revenues from billionaire flight and that more than 30% of the billionaire tax base used to calculate the $100 billion figure has already left the state. After accounting for high-profile departures, the report found that the measure would generate closer to $40 billion, still a lot of money but not the $100 billion being promoted. After accounting for lost income tax revenue, the report found that the state may actually lose money in the long run as billionaires leave and take their money with them. We asked the proposition’s backers about these discrepancies and about the possibility of lost income tax revenue. According to them, the Hoover Institution report is “propaganda” and the evidence shows that “billionaires do not move” at significant rates because of taxes. The evidence is mixed but places that have instituted wealth taxes, such as [France](https://www.researchgate.net/publication/228281017_The_Economic_Consequences_of_the_French_Wealth_Tax) and [Norway](https://www.theguardian.com/world/2023/apr/10/super-rich-abandoning-norway-at-record-rate-as-wealth-tax-rises-slightly), have seen substantial wealth and capital departures and their tax revenues suffered as a result. It’s important to note that this was observed to be happening in those countries even though billionaires were facing cross-nation migration. Migrating within the US to an adjacent state is significantly easier – sure enough, the Nevada side of Lake Tahoe has been experiencing an [influx](https://www.forbes.com/sites/jimdobson/2026/04/08/inside-lake-tahoes-billionaire-real-estate-boom/) of billionaires. The incentives for wealthy individuals to move out of California or to avoid starting their businesses here in the first place do not stop at just this 5% wealth tax. In a few short years, Prop. 40 revenues will dry up and our healthcare programs will once again be in need of funding. The measure’s backers were not able to offer any ideas for how the state will fund these programs when the time comes but plausibly, Prop. 40 is telling billionaires that they are now liable to be tapped when the state sees fit. If they choose to flee, as they’ve done in European countries, the state will lose out on future tax revenue and be in an even worse position, not just to fund healthcare, but to fund anything. Even if we were to assume that the federal government will reverse their funding cuts once this administration is replaced, Prop. 40 if approved by voters will cause the state to lose sources of tax revenue. Ultimately, then, Prop. 40 threatens to shift more of the state’s fiscal burden in the long run onto non-billionaires – not quite making billionaires pay their fair share as Prop. 40’s advocates tell us. Nevertheless, the proposition’s backers tell us that this is an unprecedented emergency that requires immediate action – “the house is on fire” they told us. Even if we were to grant that our healthcare system is facing an emergency, Prop. 40 does not appear to be a viable strategy for addressing it. According to [analysts](https://taxfoundation.org/research/all/state/california-proposition-40-wealth-tax-constitutional-legal-issues/) from across the [political spectrum](https://calbudgetcenter.org/news/new-analysis-proposition-40-could-raise-billions-but-poses-serious-tradeoffs/), Prop. 40 also has an abundance of constitutionally dubious components, including its retroactivity and application to unrealized assets. These components and more will be thoroughly challenged in court, which further complicates the argument that Prop. 40 is a sound emergency option. As the California Budget and Policy Center notes, “Courts may strike down the measure or portions of it and conflicting measures could lead to years of litigation.” In other words, it wouldn’t even function as a last-minute bandaid to prevent a “catastrophe”. Making billionaires pay their fair share sure sounds nice, but measures like Prop. 40 will only leave Californians worse off. *Rafael Perez is a columnist for the Southern California News Group. Write to him at rafaelperezocregister@gmail.com*