California Voters Approve Constitutional Ban on New Personal Property Taxes

California voters have approved a constitutional amendment that prohibits the state from creating new taxes on personal property, capping a hard fought ballot battle over wealth taxation that drew in some of the technology industry's biggest names.

Proposition 42 passed on Friday with just over 51% of the vote, while nearly 49% of voters opposed it, with approximately 96% of ballots counted. The measure had held a narrow lead since vote counting began on November 3.

The amendment bars the state from introducing new taxes on the ownership of personal property, a category that includes 401(k) retirement accounts, financial investments, digital assets, intellectual property and business interests. Real estate is excluded from the restrictions.

The measure also outlaws retroactive state taxes, except in cases of a state-declared emergency, and limits the state's ability to impose new taxes on accumulated personal wealth. Existing income taxes remain unaffected.

The result comes after voters defeated Proposition 40, a separate ballot initiative that sought to impose a one-time 5% tax on California billionaires, with the revenue intended primarily for healthcare and additional funding for education and food assistance. Proposition 42 was introduced as a competing measure designed to keep Proposition 40 from taking effect, and had both passed, the one receiving more affirmative votes would generally have prevailed. Although the billionaire tax was rejected on its own, the amendment now creates a constitutional barrier to similar wealth tax proposals in the future.

Building a Better California, a group financed by Google co-founder Sergey Brin, venture capitalists and other technology executives, organized the campaign supporting the amendment, according to the Associated Press. The measure also received backing from the California Small Business Association, the California Senior Alliance and the California Professional Firefighters organization, according to the Los Angeles Times.

The campaign highlighted concerns among wealthy business owners about the potential taxation of assets that had risen sharply in value without being sold. An October analysis of the proposed wealth tax examined how Proposition 40 could have affected owners of valuable private companies, raising questions about business domicile, residency and the valuation of privately held assets. California generally taxes income and realized capital gains rather than increases in the value of unsold investments, and the amendment prevents the state from creating new taxes based on ownership of covered financial assets.

Supporters argued the amendment would stop future lawmakers from extending wealth taxes beyond billionaires to retirement accounts and other financial holdings owned by ordinary residents. Susan Shelley, vice president of communications at the Howard Jarvis Association, which opposed the proposed billionaire tax, said the vote reflected concerns that retirement savings could become targets for future taxation.

The outcome underscores the distinction between taxing income and taxing accumulated wealth, an issue that has also featured in international tax policy debates. In Israel, the Tax Authority has been preparing proposals for additional revenue, including potential taxes on vacant land and changes to value-added tax collection, though those proposals concern a different tax system and do not involve California's constitutional restrictions.

Supporters of Proposition 40 have indicated they may return with another proposed wealth tax in the 2028 election. Any future proposal targeting the ownership of personal assets would now need to address the constitutional restrictions established by Proposition 42, potentially requiring voters to repeal or amend those provisions.