Could the passage of competing Prop 42 permanently shield California's billionaires from future state-level wealth taxes on illiquid assets?

Question

Accepted Answer

No. If Proposition 42 passes, it would make a California wealth tax on illiquid assets much harder, but not permanently impossible. Prop. 42 is drafted as a constitutional amendment barring new state taxes on the ownership of financial assets and other tangible or intangible personal property, and banning certain retroactive taxes. That reaches the core of what Prop. 40 tried to tax: privately held businesses, securities, art, collectibles and intellectual property. So as a practical matter, Prop. 42 would likely block future state-level wealth taxes aimed at billionaires’ illiquid assets under the current constitution. But “permanently” overstates it. California voters can amend the state constitution again in a future election. The Legislature and initiative sponsors could also try to design a different tax that falls outside Prop. 42’s language, though that would be legally difficult. Analysts cited in ballot materials said Prop. 42 would restrict options and create new barriers, not make change impossible forever. There is also likely to be litigation over scope. Terms such as “ownership,” “personal property,” “financial assets,” and the retroactivity ban would have to be interpreted by courts. A future tax framed as an income tax, an excise, or some other levy tied to realization or transactions rather than mere ownership might be argued to survive, though that would depend on its design and judicial rulings. So Prop. 42 would be a powerful shield for California billion…

California Voters Reject 5% Billionaire Tax as Newsom Backs Blocking Measure

Sources

Sources

California Voters Reject 5% Billionaire Tax as Newsom Backs Blocking Measure

Summary

Sources

Insights

Related Stories

Sources

Related Stories