La Palma, California – October 5, 2026: People participate in a rally against Proposition 40 at the Ironworkers Apprenticeship Training Center on Monday, October 5, 2026 in La Palma, California. California Proposition 40 is a ballot initiative proposing a one-time 5% wealth tax on California billionaires to be placed on the November 3, 2026 general election ballot. (Eric Thayer / Los Angeles Times via Getty Images)
Eric Thayer | Los Angeles Times | Getty Images
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The likely failure of California’s billionaire tax could prompt Congressional Democrats to propose higher federal taxes on high earners, along with the possibility of a federal wealth tax, tax experts say.
California’s votes are still being counted, but 56% of California voters voted “no” and 44% voted “yes” on the billionaire tax. Election experts say it is likely to fail because the ballot measure requires a majority vote to approve. The tax, known as “Proposition 40,” would impose a one-time 5% tax on Californians’ net worth of more than $1 billion.
Two ballot measures designed as poison pills for the billionaire tax are gaining strong support. Propositions 41 and 42, which limit the use of revenue and prevent state taxes on personal assets, both received a majority vote. If either gets more votes than the Billionaire Tax, the Billionaire Tax will be defeated.
The health care workers union that sponsored the billionaire tax proposal, the International Service Workers Union United Health Care Workers West, all but conceded defeat Tuesday night and said they would try again in 2028 unless Congress takes steps to “make billionaires pay their fair share.”
Proposals to raise income taxes on the wealthy have been successful in other states. In Washington state, voters approved a new “millionaire’s tax” that would impose a 9.9% tax on household incomes over $1 million a year. Colorado is all too close to passing a plan to replace the 4.4% flat tax with a progressive income tax with a top rate of 8.4% on incomes over $1 million.
With Democrats expected to take control of both houses of Congress, tax experts predict a flurry of new tax proposals aimed at raising taxes on high-income earners and cutting taxes on low- and middle-income earners.
“It’s clear that Democrats are trying to cut taxes on middle-income households and raise taxes on certain businesses and high-income households,” said Howard Gleckman, a nonresident fellow at the Tax Policy Center. “But it’s too early to know how.”
The proposals could include plans like those floated last year by Sens. Chris Van Hollen (D-Md.) and Cory Booker (D.N.J.). Mr. Van Hollen’s plan would impose a new graduated surtax on people making more than $1 million a year, starting with a 5% surtax on those making between $1 million and $2 million a year and rising to 12% for those making more than $5 million a year. The new maximum interest rate will be 49%, below the existing maximum marginal rate of 37%.
The increase will be offset by a tax cut for low- and middle-income earners, creating a new exemption worth $46,000 for single filers and $92,000 for joint filers. Van Hollen also proposes raising the top tax rate on capital gains from 23.8% to 35.8%.
WASHINGTON, DC – AUGUST 4: Sen. Cory Booker (D-N.J.) speaks as members of the Senate Judiciary Committee gather to vote on Todd Branch’s nomination for U.S. attorney general on August 4, 2026 at the U.S. Capitol in Washington, DC. Blanche’s nomination had been delayed after Sens. John Cornyn (R-Texas) and Thom Tillis (R-North Carolina) expressed concerns about the Justice Department’s $1.8 billion anti-weaponization fund, which Blanche withdrew earlier this week. (Photo by Win McNamee/Getty Images)
Win McNamee | Getty Images News | Getty Images
Mr. Booker’s plan would be similar, but would increase the top tax rate to 43% and more than double the standard deduction of $37,500 for single filers and $75,000 for joint filers.
Taxing the wealthy has proven popular among Democrats, but tax experts say combining tax increases with tax cuts for low- and moderate-income taxpayers could be difficult given budget deficits.
“Given the revenue needs of the deficit and the Democratic spending priorities, the key question is how much further cuts should be prioritized,” said Garrett Watson, vice president of federal tax policy at the Tax Foundation. He said those priorities include reversing Trump-era tax cuts and increasing spending.
Plans for a federal wealth tax and a tax on unrealized gains could also attract more attention. California Democratic Rep. Ro Khanna, who is campaigning for a billionaire tax in California and whose Silicon Valley district is home to many high-tech assets, has teamed up with Sen. Bernie Sanders (R-Vt.) on a bill they call the “Make Billionaires Pay Their Fair Share Act.”
The plan would impose a 5% tax on net assets of $1 billion or more. But unlike California’s tax, which was a one-time levy, the Khanna-Sanders plan would be an annual levy.
Of course, President Trump is likely to veto any Democratic tax proposal, especially if it targets the Trump tax cuts passed in 2017 and extended and expanded last year. But tax experts say the plans Democrats introduce over the next two years could influence tax policy in the 2028 election and highlight the party’s priorities.
“Proposals made in 2027 will shape future policy direction,” the Tax Foundation said in a report. “While their ambitions to raise taxes will be limited by President Trump’s veto, these proposals will serve as a messaging and discussion vehicle for the direction of the tax law over the next two years.”
