Should States Tax Their Richest Residents More? California and Washington Decide in November
October 9, 2026 by
When voters go to the polls on November 3, they will decide about 27 statewide tax measures, according to MultiState, a firm that tracks state legislation.1 Most would cut property taxes. Four, in California and Washington, ask a different question: Should a state’s richest residents pay more? California voters will decide whether to make a tax on high incomes permanent and whether to impose a one-time tax on billionaires’ wealth. Washington voters will decide whether to repeal the state’s first income tax before it takes effect. Behind both fights is a problem every state shares: Schools, roads, law enforcement, and hospitals cost money, and someone has to pay for them.
How States Pay for Services
State and local governments rely on three main taxes: income, sales, and property. The mix differs sharply from state to state. California depends heavily on a steeply graduated income tax; about half of its income tax revenue comes from the top 2% of taxpayers.2 Washington had no income tax at all until this year and raises most of its revenue from sales and business taxes.3
Two research organizations rate those systems in opposite directions. The Institute on Taxation and Economic Policy, a left-leaning think tank, ranks Washington as the second most regressive tax system in the country, meaning low-income households pay a larger share of their income in state and local taxes than wealthy households do, and ranks California among the least regressive.4 The Tax Foundation, a right-leaning think tank, ranks California 48th of 50 in its 2026 State Tax Competitiveness Index, which rewards low rates and simple codes.5 The rankings do not contradict each other. One measures who pays what share of their income; the other measures whether a tax code encourages investment. Which measure matters more is close to the heart of the November debate.
What Is Being Proposed?
California has three related measures. Proposition 3 would make permanent a tax on high incomes that voters first approved in 2012 and extended in 2016. The rates range from 10.3% on individual income above roughly $360,000 to 12.3% above roughly $721,000, raise $5 billion to $15 billion a year for schools and community colleges, and are set to expire in 2031. The California Teachers Association placed the measure on the ballot.6 Proposition 40 would impose a one-time 5% tax on the net worth of the roughly 200 Californians worth more than $1 billion. Its sponsor, a health care workers’ union, projects about $100 billion over five years, with 90% dedicated to health care. The state’s nonpartisan Legislative Analyst estimates a temporary gain of tens of billions of dollars and a possible ongoing loss of under $1 billion a year in income tax if billionaires leave.7 Proposition 42, placed on the ballot by opponents of the billionaire tax, would prohibit any new state tax on the ownership of personal property such as stocks, business interests, and retirement accounts. If it receives more “yes” votes than Proposition 40, it cancels the billionaire tax even if both pass.8
Washington is moving the other way. In March, the Washington State Legislature enacted the state’s first income tax: 9.9% on annual income above $1 million, applying only to the portion above that line, beginning with income earned in 2028. Initiative 645 would repeal it before it takes effect. The state Office of Financial Management estimates repeal would erase $11.4 billion in projected revenue over five years.9
Arguments in Favor of the California and Washington Taxes
Supporters argue that both measures respond to a widening gap between the wealthiest households and everyone else, and to tax codes that widen it further. The Institute on Taxation and Economic Policy calculates that the lowest-income fifth of Washington households pays 13.8% of its income in state and local taxes while the top 1% pays 4.1%, so income disparities in the state are larger after taxes are collected than before.10 In California, the combined net worth of the state’s billionaires rose by roughly $432 billion, about 25%, in less than two years, according to an analysis by progressive groups backing Proposition 40.11 Economists Emmanuel Saez and Gabriel Zucman of the University of California Berkeley, whose research inspired the measure, calculate that from 2019 to 2025 those billionaires’ wealth grew more than 15% a year while they paid about 0.26% of it annually in state income tax. Saez calls the campaign “a fight between democracy and oligarchy.”12 Sen. Bernie Sanders (I-Vt.), the measure’s most prominent champion, describes this as “a time of unprecedented income and wealth inequality” and argues that California’s billionaires grew $500 billion richer last year alone, five times what the tax would raise.13
Supporters also argue that these states ask too little of those most able to pay. Washington Gov. Bob Ferguson (D) framed the fight over Initiative 645 as “a choice between the future and the past,” arguing that the tax pays for new investments in education, child care, and food assistance while cutting taxes for working families.14
In California, supporters emphasize what is at stake if the money disappears. Starr Avila, a high school cafeteria manager in Jurupa Valley, wrote that Proposition 3 “doesn’t raise taxes on anyone. It simply stops millionaires and billionaires from getting a tax cut they don’t need.”15 The union behind Proposition 40 points to federal Medicaid cuts that state officials project could cost California about $30 billion a year, and argues that the people who gained most from recent federal tax changes should help fill the gap.16 Supporters also note that Proposition 40 exempts pensions and ordinary retirement accounts, and call Proposition 42’s warnings about middle-class savings misleading.17
Arguments Against the California and Washington Taxes
Opponents argue that taxing the wealthy more heavily drives them away and leaves everyone else holding the bill. Brian Heywood, the hedge fund manager whose group sponsored Initiative 645, argues that Washington’s threshold will not stay at $1 million: “Every wage earner and voter knows they have a target on their back, and this income tax is coming for all of us.”18 In California, an analysis by the Hoover Institution, a conservative think tank at Stanford University, estimates that billionaires representing about 30% of the Proposition 40 tax base have already said they are leaving the state, lowering expected revenue by $60 billion. One San Francisco tax attorney told CalMatters that “a third to half” of his affected clients have moved.19
Robert Gutierrez, president of the California Taxpayers Association, argues that Proposition 3 continues a pattern in which “temporary” taxes never expire, and that it deepens the state’s dependence on its most volatile revenue source: income that surges in good years and collapses in bad ones.20 Opposition to the billionaire tax is not confined to business groups. The California Medical Association, the California Teachers Association, and Planned Parenthood oppose Proposition 40, arguing that nothing in it guarantees the money will replace federal cuts rather than free up state funds for other uses. The medical association says the measure “would make California’s health care funding more dependent on a volatile revenue source and could ultimately undermine long-term funding for the patients it seeks to help.”21 California Gov. Gavin Newsom (D) also opposes it, warning that wealthy residents will leave and future revenue will fall, though the state Democratic Party endorsed it over his objection.22
A second objection is simpler: How would the state know what a billionaire is worth? Income is reported on a tax return every year. Wealth is not. Much of a billionaire’s fortune sits in companies that are not traded on a stock exchange, in art, and in other holdings that have no price tag until they are sold. Proposition 40 would give California six months to set up a way to put a value on all of it, and the Legislative Analyst expects that to cost tens of millions of dollars a year for several years.23 Ray Ball and Andrew Sutherland, accounting professors at the University of Chicago and Massachusetts Institute of Technology, argue that private companies are the hardest to value. They point out that Austria, Denmark, Finland, France, Sweden, the Netherlands, and other countries tried wealth taxes and gave them up: wealthy residents moved their money or themselves abroad, the taxes were expensive to run, and they raised less than expected.24 Jared Walczak of the Tax Foundation, writing for the California Tax Foundation, argues that the measure’s rules for deciding who owes the tax and how much are “constitutionally unsound,” and predicts years of lawsuits before the state collects much of anything.25 Joel Slemrod, a University of Michigan economist who studies tax policy, adds that one lesson from Europe may apply with more force here: It is much easier to move money from one state to another than from one country to another.26
Supporters reply that a one-time tax on a few hundred people is a far smaller job than the yearly taxes Europe abandoned, and a report by four law and economics professors, including Saez, argues the tax can be made to work.27
Broader Questions
Both sides say they are protecting the middle class. Supporters of the California and Washington taxes say they shield working families from service cuts and from carrying a larger share than the wealthy. The backers of Proposition 42 say they are protecting the retirement savings of teachers, firefighters, and police officers, and opponents of Washington’s tax say a threshold set at $1 million today will not stay there as the state continues to spend. Part of the disagreement is about facts that cannot yet be known. Slemrod says there is very little evidence on how billionaires would respond to a tax like Proposition 40: “I wouldn’t jump from the evidence we have to California.”28 The rest is about what a state owes its residents, and which residents it owes most.
Discussion Questions
- What have you heard from friends, family members, and others in your life—including people and groups you engage with online—about whether the wealthy pay their fair share? What do people mean by “fair share”?
- One think tank ranks Washington’s tax system the second most regressive in the country; another rewards states with no income tax for their low rates and simple codes. Can both be right? Which measure matters more to you, and why?
- Proposition 40 would collect a one-time tax from about 200 people. Supporters say those who gained most from recent federal tax changes should help replace federal health care cuts; opponents say many will leave and the state will lose more over time. How should voters weigh a certain gain now against a potential loss later?
- Several European countries adopted wealth taxes and later repealed them. Supporters say a one-time tax in a single state is a different thing; opponents say the same problems of valuation, tied-up assets, and flight apply. How much should other countries’ experience guide a decision in California?
- Opponents of Washington’s tax say a $1 million threshold could later be lowered. Supporters say that is a reason to oppose lowering it, not the tax itself. Should voters judge a tax by what it does now or by what it could become?
- When a state designs its tax system, whose interests should come first: the lowest-income households, the middle class, homeowners, businesses, or the services the taxes pay for? How would you rank them, and what would change your ranking?
- If you were voting in California or Washington, how would you vote on each measure? What factors would guide your decision?
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Sources
Image Credit: Ann in the uk | Shutterstock
[1] MultiState, “Tax Policy is on the Ballot this Fall (Property Tax Exemptions and More),” July 17, 2026: https://www.multistate.us/insider/2026/7/17/tax-policy-is-on-the-ballot-this-fall-property-tax-exemptions-and-more
[2]San Francisco Chronicle Editorial Board, “Billionaire tax is getting the attention. But Prop 3 will decide California’s future,” September 2026: https://www.sfchronicle.com/opinion/editorials/article/california-taxes-proposition-3-22435509.php
[3]Institute on Taxation and Economic Policy, “Washington: Who Pays? 7th Edition,” January 2024: https://itep.org/whopays/washington/
[4]Institute on Taxation and Economic Policy, “Who Pays? A Distributional Analysis of the Tax Systems in All 50 States,” 7th ed., January 2024, ITEP Tax Inequality Index: https://itep.org/whopays-map-7th-edition/; ITEP, “California: Who Pays? 7th Edition” (California ranks 47th of 51, with only three states and D.C. less regressive): https://itep.org/whopays/california/
[5]Tax Foundation, 2026 State Tax Competitiveness Index: https://taxfoundation.org/publications/state-business-tax-climate-index/
[6]CalMatters, “Proposition 3: High-income tax,” 2026 Voter Guide: https://calmatters.org/california-voter-guide-2026/proposition-3-high-income-tax/
[7]CalMatters, “Proposition 40: Billionaire tax,” 2026 Voter Guide (including ballot label and fiscal impact statement from the California Secretary of State): https://calmatters.org/california-voter-guide-2026/proposition-40-billionaire-tax/
[8]CalMatters, “Proposition 42: Property taxes,” 2026 Voter Guide: https://calmatters.org/california-voter-guide-2026/proposition-42-property-taxes/
[9]Bloomberg Tax, “Washington Millionaires Tax Repeal Bid Heads for State Ballot,” July 2026: https://news.bloombergtax.com/daily-tax-report/washington-millionaires-tax-repeal-bid-heads-for-state-ballot; Washington Office of Financial Management, “Fiscal Impact Statement for Initiative 645,” July 2026 (hosted by the Washington Secretary of State): https://www.sos.wa.gov/sites/default/files/2026-07/FIS%20-%20Initiative%20645%20-%20FINAL.pdf
[10]Institute on Taxation and Economic Policy, “Washington: Who Pays? 7th Edition,” January 2024: https://itep.org/whopays/washington/
[11]Los Angeles Times, “California billionaires opposing Prop. 40 saw their wealth soar, report says,” September 2026: https://www.yahoo.com/news/politics/articles/california-billionaires-opposing-prop-40-185519666.html
[12]UC Berkeley College of Letters & Science, “Why California’s billionaire tax is a toss up as midterms near,” October 2026 (statement of Emmanuel Saez): https://ls.berkeley.edu/news/why-californias-billionaire-tax-toss-midterms-near; Saez and Zucman analysis as reported by Truthdig (a progressive outlet), “Meet the 22 California Billionaires Opposing Prop. 40,” September 2026: https://www.truthdig.com/articles/meet-the-22-california-billionaires-opposing-prop-40/
[13]Bernie Sanders, “Yes, California should pass a wealth tax on billionaires to save healthcare,” San Francisco Chronicle, October 3, 2026: https://www.sfchronicle.com/opinion/openforum/article/billionaire-tax-california-prop-40-22458432.php
[14]KOMO News, “Ferguson, organized labor launch No on I-645 campaign,” July 14, 2026: https://komonews.com/news/local/ferguson-organized-labor-launch-no-on-i-645-campaign-millionaires-tax-funding-commitments-initiative-lets-go-washington-small-businesses-high-income-households
[15]Starr Avila, “Proposition 3 sustains California schools. Losing the high-income tax would be devastating,” CalMatters, August 18, 2026: https://calmatters.org/commentary/2026/08/proposition-3-california-schools-funding/
[16]SEIU United Healthcare Workers West, “Prop 40: The California Billionaire Tax Act”: https://www.seiu-uhw.org/ca-billionaire-tax-act/; Jeanne Kuang and Kristen Hwang, “Billionaire tax explained: What you need to know about Prop. 40,” CalMatters, October 1, 2026: https://calmatters.org/politics/2026/10/california-billionaire-tax-explainer/
[17]Kuang and Hwang, CalMatters, October 1, 2026: https://calmatters.org/politics/2026/10/california-billionaire-tax-explainer/
[18]Axios Seattle, “Washington millionaires tax faces repeal ballot fight,” July 14, 2026: https://www.axios.com/local/seattle/2026/07/14/washington-millionaires-income-tax-repeal-ballot-initiative-i-645-november
[19]Hoover Institution, “Net Present Value: Billionaire Tax Act Assessment of Fiscal Effects”: https://www.hoover.org/research/net-present-value-billionaire-tax-act-assessment-fiscal-effects-californias-proposed; Kuang and Hwang, CalMatters, October 1, 2026 (statement of tax attorney Jon Feldhammer): https://calmatters.org/politics/2026/10/california-billionaire-tax-explainer/
[20]Robert Gutierrez, “This high-income tax was pitched as ‘temporary.’ California voters can ensure it stays that way,” CalMatters, August 18, 2026: https://calmatters.org/commentary/2026/08/proposition-3-temporary-tax-permanent/
[21]CalMatters, “Proposition 40: Billionaire tax,” 2026 Voter Guide (endorsements): https://calmatters.org/california-voter-guide-2026/proposition-40-billionaire-tax/; Newsweek, “Momentum Grows for Billionaire Wealth Tax in California,” August 2026 (statement of the California Medical Association): https://www.newsweek.com/momentum-grows-billionaire-wealth-tax-california-12281171
[22]CalMatters, “California Democrats defy Newsom, back billionaire tax,” August 4, 2026: https://calmatters.org/politics/2026/08/billionaire-tax-california-democrats-split/
[23]Kuang and Hwang, CalMatters, October 1, 2026: https://calmatters.org/politics/2026/10/california-billionaire-tax-explainer/; Legislative Analyst’s Office fiscal estimate as summarized in the California Secretary of State’s ballot materials for Proposition 40.
[24]Ray Ball and Andrew Sutherland, “The Proposed California Billionaire Wealth Tax Produces Inequities and Adverse Incentives,” MIT Golub Center for Finance and Policy, August 20, 2026: https://mitsloan.mit.edu/centers-initiatives/mit-gcfp/proposed-california-billionaire-wealth-tax-produces-inequities-and-adverse-incentives
[25]California Tax Foundation, “Proposition 40 White Paper Describes Wealth Tax Measure’s Drafting Errors, Implementation Challenges and Constitutional Problems,” August 18, 2026 (statement of Jared Walczak): https://caltax.org/news-release/proposition-40-white-paper-describes-wealth-tax-measures-drafting-errors-implementation-challenges-and-constitutional-problems/; Tax Foundation, “Constitutional Flaws of California’s Proposed Wealth Tax,” September 30, 2026: https://taxfoundation.org/research/all/state/california-proposition-40-wealth-tax-constitutional-legal-issues/
[26]Kuang and Hwang, CalMatters, October 1, 2026 (statement of Joel Slemrod): https://calmatters.org/politics/2026/10/california-billionaire-tax-explainer/
[27]Brian Galle, David Gamage, Emmanuel Saez, and Darien Shanske, “Expert Report on Proposition 40, the California 2026 Billionaire Tax,” July 20, 2026: https://eml.berkeley.edu/~saez/galle-gamage-saez-shanskeCAbillionairetaxJuly26.pdf
[28]Kuang and Hwang, CalMatters, October 1, 2026 (statement of Joel Slemrod): https://calmatters.org/politics/2026/10/california-billionaire-tax-explainer/
