Professor Shanske Helps Craft California's Billionaire Tax

On Nov. 3, the most prominent wealth-tax proposal of the recent “tax the rich” era will go before California voters. UC Davis Law Professor Darien Shanske is one of its architects.

Shanske drafted Proposition 40, the Billionaire Tax Act, with Professors Brian Galle and Emmanuel Saez (UC Berkeley) and David Gamage (University of Missouri). If approved, it would levy a one-time, 5% tax on the state’s 200-plus billionaires.

The academics acted on behalf of proposition backer SEIU-United Healthcare Workers West after the One Big Beautiful Bill Act of 2025 slashed federal healthcare funding to states. But they had worked on a wealth tax for years, publishing articles in the Duke Law Journal, California Law Review and elsewhere.

“Our income and property taxes have failed to address these big fortunes, and our inheritance taxation doesn’t reach them, either,” Shanske said. “That wouldn’t necessarily be a big deal, except the fortunes are so big, while we have enormous inequality. Even the inequality wouldn’t be such a big deal if we covered basic needs. But we don’t, and we are moving in the wrong direction.”

The Big Beautiful Act, Prop. 40’s drafters say, takes from the poorest Americans to give tax cuts to the wealthiest. But even before its passage, most billionaires paid fewer taxes than most people realize. Instead of selling the stock that composes most billionaire fortunes, and being taxed, they typically borrow against it. “Borrowing is not a taxable event,” Shanske explained, and it allows them to continue to “enjoy being a billionaire.” 

Prop. 40 would tax billionaires’ worldwide net worth. It could generate around $100 billion, its drafters estimate, to address the impact of 2 million or more Californians losing health coverage because of cuts to Medicaid (Medi-Cal in California).

“It’s a health system issue,” Shanske said. “If you say, ‘Well, I am not on Medi-Cal, so it doesn’t affect me,’ that is not how it works. If an emergency room closes because of the cuts, what does that mean for nearby emergency rooms? And remember, emergency rooms must attend to the uninsured who are going to come in with more severe problems because they lack routine care.”

Economic justice motivates Shanske, an expert in state and local taxation, local government law and public finance who has worked on tax proposals in other states. He also objects to inefficiency.

“It is incredibly wasteful to take basic preventive care from two million people. And if you can pay for it with an amount of money that is so small—most billionaires have already made far more than we are taxing them just this year on the appreciation of their assets—that is just good economics.”

Well-resourced opposition

Many billionaires disagree. The political action committee Building a Better California, led by Google co-founder Sergey Brin, introduced two counterinitiatives, Prop. 41 and 42, and has spent a reported $300 million fighting the tax.

Opposition also comes from less expected corners. Democratic Gov. Gavin Newsom opposes Prop. 40, while expressing support for a national wealth tax. Planned Parenthood Affiliates of California also opposes the billionaire tax, citing its one-time application as insufficient.

Amid the high-profile fray, Prop. 40 is slightly favored to pass in most polls in the days leading to the election. Sen. Bernie Sanders (I-Vermont) and Rep. Ro Khanna (D-Santa Clara) are the most vocal advocates, with additional support coming from six Nobel laureates.

Gamage and Saez had worked on Sen. Elizabeth Warren’s groundbreaking Ultra-Millionaire Tax Act of 2021, later recruiting Shanske and Galle to consider other possibilities.

“When that proposal didn’t go anywhere at the federal level–although it obviously got a lot of attention–the next question was ‘Could a state impose a tax like that?’” Shanske said. Once the professors decided one could, they homed in on California and its disproportionate number of billionaires (the state holds 12% of the U.S. population, but 27% of its billionaires, the academics found).

After drafting a wealth-tax bill for then-Assemblyman (now Attorney General) Rob Bonta during the pandemic, they kept revising, until the Big Beautiful Bill brought new urgency. 

Prop. 40 applies to billionaires who resided in California as of Jan. 1, 2026, thus preempting the main would-be argument against it: that its passage would cause the ultra-rich to flee. Indeed, Meta CEO Mark Zuckerberg recently made it clear he will stay after striking a deal with the company. 

Much anti-Prop. 40 messaging instead has come via the “Yes on 42” campaign, which asserts that the tax opens a constitutional door to taxing everyday Californians’ retirement accounts, something the Prop. 40 drafters dispute.

They point out that any tax beyond their one-time, 5% stopgap must go through the same ballot-qualifying process as Prop. 40 or receive a two-third majority vote in the Legislature and the governor’s signature. Since Democrat and likely next governor Xavier Becerra also opposes Prop. 40, that last stage might be especially challenging.

'That's not how the law works'

Potential 2028 presidential contender Newsom went a step further than Becerra by actively endorsing Prop. 42. Shanske said he was disappointed—especially by Newsom’s support for what he calls a “poison pill” proposition—but not entirely surprised.

“He had clearly expressed his opposition to our earlier versions of the wealth tax. On the other hand, I had thought, speaking just for myself, that given this was a needless disaster created by the Trump administration, that (Newsom) could reasonably say, ‘I don’t think this is the best policy, but … I will support this as a one-time response.’”  

The billionaire reaction to Prop. 40 has surprised Shanske, though.

“I have proposed taxing big multinational corporations in various ways, and that definitely triggered responses and angry op-eds from the Wall Street Journal. But the magnitude of negative responses to this, as well as their increasingly tenuous nature both as a policy and legal matter is just something else. … As a law professor, I feel particularly obligated to say, ‘Well, that is not actually true. That’s not how the law works.’”

That obligation entails fielding frequent media inquiries about the opposition’s latest assertions, writing editorials or just sitting down with journalists curious about the people behind the tax. (The New Yorker, New York Times and Sacramento Bee recently ran expansive pieces).

Shanske is used to balancing research, a full teaching load and invitations to testify before legislators. This is different.

“I have never been so busy,” he said.