Read It For Yourself - Californians Against Wasteful Spending and Higher Taxes

Read It For Yourself:
The 2026 Wealth Tax

The Legislature Can Expand the Tax to Every Taxpayer

What it says (Section 50310):

“The Legislature may amend the 2026 Billionaire Tax Act, by statute passed in each house of the Legislature by rollcall vote entered in the journal, two-thirds of the membership concurring, if the statute is consistent with and furthers the purposes of the 2026 Billionaire Tax Act.”

What it means:

While proponents say this tax only applies to billionaires, the Wealth Tax is carefully drafted to give the Legislature far broader power than voters might expect. Section 50310 authorizes the Legislature to amend the “2026 Billionaire Tax Act” — and that term refers to the entire initiative, not just the tax code sections. The initiative’s own language proves this is intentional. When referring to the 15 statutory sections within Part 27, it uses the phrase “this Part” at least three dozen times. But in Section 50310, it deliberately uses the different and broader term “2026 Billionaire Tax Act.” Under well-established rules of statutory construction, when a law uses different words in different places, courts must give them different meanings. This means the Legislature could amend any and all portions of the initiative — including the constitutional provisions, lowering the $1 billion threshold, making the tax permanent and removing the exemptions for real property and retirement accounts. The only constraint is that any amendment must be “consistent with and further the purposes” of the Act. But those purposes leave virtually no limit on how far the Legislature could expand the tax as they cite goals of funding health care, education, and food assistance — which make up roughly two-thirds of the state budget—and targeting those with “privileges” for higher taxation. According to the Public Policy Institute of California, the estimated median household net worth in California is $288,000. Under the initiative’s findings and statement of intent, presumably the Legislature could deem net worth above that median amount as “privileged” and subject it to a wealth tax. The initiative is clear. Voters can approve a tax on billionaires today, and the Legislature can expand it to everyday Californians tomorrow.

Gives the Franchise Tax Board Sweeping Audit and Subpoena Powers Over Every Taxpayer

What it says (Section 50301(e)):

“(e) Franchise Tax Board audit responsibility. (1) The Board shall examine all returns submitted in accordance with this Part and shall determine the correct amount of the tax under this Part. The Board shall also examine all certifications or returns of taxpayers when the Board reasonably believes the taxpayers should have paid the tax imposed by this Part. Without limiting any other powers of the Board, in examining the returns made by taxpayers and examining whether returns should have been made by taxpayers but were not, the Board has all powers provided in Section 19504.” Revenue and Taxation Code Section 19504 referenced: “(c) (1) The Franchise Tax Board may issue subpoenas or subpoenas duces tecum, which subpoenas must be signed by any member of the Franchise Tax Board, and may be served on any person for any purpose.”

What it means:

This provision gives the Franchise Tax Board (FTB) extraordinary investigative powers that extend far beyond billionaires. The FTB is directed to examine all returns filed under the measure — meaning the sworn wealth declarations that every one of California’s approximately 19 million taxpayers must file.

But it goes further: the FTB is also empowered to investigate taxpayers it “reasonably believes” should have paid the tax but didn’t file, and to do so using “all powers provided in Section 19504” of the Revenue and Taxation Code. Section 19504 includes the power to issue subpoenas and subpoenas duces tecum to any person for any purpose — compelling employers, banks, financial advisors, and other institutions to turn over private financial records.

This means the FTB can subpoena the financial records of ordinary Californians — not just billionaires — if it decides to investigate whether someone should have filed. Despite being marketed as a tax on a handful of the ultra-wealthy, this provision effectively gives the state the power to rifle through the financial lives of millions of Californians who have nothing to do with the tax.

What it says (Section 50301(d)(2)):

“(2) Submit a declaration of the amount of any additional tax that is owed under this Part, together with any forms created by the Franchise Tax Board for calculating any additional tax owed under this Part, along with any required appraisals or other evidence of fair market value.”

What it means:

Section 50301(d)(2) gives the Franchise Tax Board the authority to compel employers and financial institutions to turn over records on any taxpayer the FTB decides to investigate — not just billionaires. This means the state gains sweeping new powers to search through the financial records of all California taxpayers.

Every California Taxpayer Must File a Sworn Wealth Declaration Not Just Billionaires

What it says (Section 50301(d)):

“At the time a return is filed pursuant to Section 18501 (relating to the filing of an income tax return) for the 2026 tax year, every California resident individual required to file shall:

Declare that the individual’s net assets were worth less than or equal to $1 billion ($1,000,000,000) as of the valuation date; or
Submit a declaration of the amount of any additional tax that is owed under this Part, together with any forms created by the Franchise Tax Board for calculating any additional tax owed under this Part, along with any required appraisals or other evidence of fair market value.”

What it means:

Despite being the so-called “Billionaire Tax,” this measure requires every single California resident who files an income tax return to submit a sworn declaration about their wealth under penalty of perjury.

The Tax Applies Retroactively

What it says (Section 50308(n)):

“‘Tax obligation date’ means January 1, 2026.”

And (Section 50301(a)):

“An excise tax is imposed for tax year 2026 on the activity of sustaining excessive accumulations of wealth by applicable individuals with net worth of $1 billion dollars ($1,000,000,000) or more…”

What it means:

The measure’s “tax obligation date” is set as January 1, 2026 — but the measure itself wouldn’t appear on the ballot until November 2026. This means the tax reaches back in time to create a liability for wealth that existed before voters even approved the measure. Retroactive taxation raises serious due process concerns under both the U.S. and California Constitutions, because taxpayers had no notice and no opportunity to plan for a tax that didn’t exist yet.

Miss the Payment. Pay Up to 40% More

What it says (Section 50312(c)):

(1) The penalty for a substantial understatement under this Section shall be an amount equal to 20 percent of any understatement of tax…

(2) The penalty under this Section for a gross understatement of tax shall be an amount equal to 40 percent of any understatement of tax.

What it means:

The Wealth Tax sets some of the highest penalties ever imposed for good-faith underpayments and leaves the Franchise Tax Board (FTB) with broad discretion over how much interest piles on top. If the FTB later determines that a taxpayer understated their tax—which could be due to a dispute over how to value complex assets—by more than $1 million or by more than 20 percent of the amount reported, the taxpayer is hit with a 20 percent “substantial understatement” penalty on top of the underpaid tax. If the understatement exceeds $10 million or 40 percent of the amount reported, the “gross understatement” penalty doubles to 40 percent.

Even taxpayers operating in good faith can be ensnared by these high penalties. The practical problem for taxpayers is that wealth is hard to value with precision. Privately held businesses, ranches and farmland, commercial real estate, art, and partnership interests often lack a market price. Under this measure, a disagreement over difficult-to-value assets is not resolved through a conversation; it is resolved through a penalty. A taxpayer who relied in good faith on a qualified appraisal of their assets can still walk away owing up to 40 percent more in penalties.

What starts as a good-faith tax dispute can quickly turn into a 40 percent surcharge on top of the original bill—and that bill will potentially require interest.

And With Interest and Other Charges, The Total Hit Can Climb Even Higher.

What it says (Section 50301(c)):

“Any taxpayer subject to this Part may elect to pay the tax in five equal annual installments… Any amount of tax deferred under this subdivision shall be subject to a nondeductible deferral charge of 7.5 percent per annum.”

What it means:

Unpaid taxes and any late penalties will potentially also accrue 7.5 percent interest. The measure allows taxpayers to pay the wealth tax in five equal annual installments rather than in a lump sum, but those who do owe an additional 7.5 percent “nondeductible deferral charge” each year on the unpaid balance. If a taxpayer is later found to have underpaid, it is reasonable to expect the FTB to apply that 7.5 percent annual charge to the unpaid tax and possibly to the penalty itself. The measure is silent on whether interest will be charged on penalties, which means the FTB will answer it through regulation, giving bureaucrats the final word on how much more a taxpayer ends up owing.

Only 60 Days to Challenge the Law in Court

What it says (Section 50314(c)):

“Such a validation action shall not be filed more than 60 days after the approval of the Act by the voters. If no action is filed within that period, the tax and all proceedings in relation thereto, including the adoption and approval of the Act, shall be held to be facially valid and in every respect legal and incontestable.”

What it means:

This provision deliberately attempts to permanently shield the Legislature’s power to expand the wealth tax from any legal challenge. If the measure is approved by voters on November 3, 2026, the 60-day deadline for legal challenges falls on January 2, 2027. But the 2027 legislative session does not begin until January 4, 2027 — two days after the challenge window closes. This means that by the time the Legislature is even in session to exercise its amendment power, it will be too late for anyone to challenge that power in court. And during the 60-day window when challenges are permitted, the Legislature is out of session and no amendment can be proposed — so any lawsuit would be dismissed as not yet “ripe.” The California Supreme Court has described validation actions as “speak-now-or-forever-hold-your-peace” proceedings that permanently bind all persons and entities. The result: the Legislature’s power to extend the wealth tax to all Californians becomes forever immune from legal challenge.

Courts Must Interpret the Law in Favor of the Government

What it says (Section 50313):

“The provisions of this Part shall be liberally construed to effectuate its purposes.”

What it means:

In normal tax law, ambiguities are resolved in favor of the taxpayer. This provision flips that principle on its head, directing courts to interpret any unclear language in favor of the government. Combined with the measure’s many complex and vague provisions, this means every gray area will be resolved against the taxpayer. This fundamentally undermines the basic principle that tax laws should be clear and that citizens should have fair notice of their obligations.

Courts Are Directed to Save the Law Even If It’s Unconstitutional

What it says (Section 50311(b)):

“In applying the Act, a court shall, to the maximum extent consistent with the United States and California Constitutions, preserve the imposition of the tax authorized, including by reforming dates or periods specified, using the most limited adjustment possible to cure any constitutional or other legal defect, while allowing the remaining provisions to operate.”

What it means:

This provision essentially tells courts: even if you find parts of this law unconstitutional, don’t strike it down — rewrite it to make it work. Courts are directed to “reform dates or periods” and make the “most limited adjustment possible” to keep the tax in place. This is an extraordinary instruction that asks the judicial branch to act as a legislative body, rewriting the law rather than evaluating its constitutionality. It represents a fundamental challenge to the separation of powers.

Most of the Revenue Goes to Insurance Companies

What it says (Section 5; Gov. Code § 16355(b)(1)):

“(1) Ninety percent shall be allocated to the Billionaire Tax Health Account for health care funding, which may include expenditures to restore or address any reductions in federal funding or state appropriations; investments to protect or enhance Medi-Cal and other health coverage programs for low and moderate-income individuals; support for safety net health care providers serving vulnerable populations; preventing or mitigating facility closures or reductions in service levels; and other investments to support health care access, coverage, benefits, funding, services, and payments to providers.”

What it means:

Proponents claim the measure will fund health care for Californians, but the reality is that most of the money would flow to health insurance companies. Medi-Cal does not directly provide services; it reimburses participating health care insurance plans. As of January 2025, 94.2% of all Medi-Cal beneficiaries are enrolled in managed care, where the Department of Health Care Services contracts with managed care health insurance plans and pays them a predetermined capitation payment per beneficiary per month — whether or not the beneficiary actually receives services.

Since 90% of the measure’s revenue goes to Medi-Cal, and over 90% of Medi-Cal dollars flow through health insurers, the chief result of the BTA would be to increase revenues for health insurance plans by tens of billions of dollars — making insurance companies one of, if not the biggest, financial beneficiaries of the measure.

Diverts Tens of Billions of Dollars Away from K-14 Schools

What it says (Section 5; Gov. Code § 16355(b)(2)

“(2) Ten percent shall be allocated to the Billionaire Tax Education and Food Assistance Account for education-related and food assistance expenditures.”

What it means:

Under current law, K-14 schools receive approximately 43% of overall General Fund tax proceeds, and as a percentage of new or additional General Fund tax revenues, schools get approximately 54% thanks to the Proposition 98 guaranteed funding formula voters approved in 1988. But the measure deliberately exempts itself from Proposition 98. Proponents estimate the tax will raise $100 billion in revenue (based on the 5% tax applying to $2 trillion in assets). Under Proposition 98, that would mean $54 billion for K-14 schools.

Instead, the measure allocates only 10% of its proceeds to schools. In other words, the BTA takes tens of billions of dollars that would otherwise go to California’s public schools and redirects them primarily to health insurance companies.

Nonresident Exemption Creates Arbitrary and Unfair Results

What it says (Section 50308(a)):

Only individuals who are California residents on January 1, 2026 are subject to the new tax. Out-of-state residents can own billions worth of personal property in California but are exempt.

What it means:

This exemption for nonresidents creates wildly unfair outcomes, particularly for professional sports franchises. Nine California-based professional sports teams with a combined value of $55.15 billion — including the San Francisco 49ers ($8.6B), Los Angeles Lakers ($10B), LA Clippers ($7.5B), LA Dodgers ($6.9B), LA Rams ($10.5B), and others — would likely owe zero tax because they are owned by out-of-state residents.

Meanwhile, California-resident-owned teams like the Golden State Warriors ($11B), Sacramento Kings ($4.45B), San Diego Padres ($1.95B), LA Chargers ($6B), San Jose Sharks ($1.5B), and Anaheim Ducks ($1.4B) would face a combined tax liability of up to approximately $1.315 billion. The result: teams hit by the tax are put at a significant competitive and financial disadvantage compared to teams that avoid it entirely — simply because of where their owner lives.

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