California's Billionaire Tax Failed. States Found Other Ways

Voters in five states backed higher income taxes on the rich in the 2026 midterms, even as California rejected its billionaire wealth tax. The pattern is clear. Taxing income works at the ballot box. Taxing wealth does not.

California's Proposition 40 would have imposed a one-time 5% tax on the net worth of the state's roughly 200 billionaires. Google cofounder Sergey Brin and several other billionaires spent nearly $400 million persuading voters to reject it. A majority did. Emmanuel Saez, a University of California, Berkeley, economist who helped design Proposition 40, said: "Today oligarchy has won."

Yet the broader picture favors tax hikes, according to Allison Anna Tait, a law professor at the University of Richmond who studies wealth inequality.

Which income tax measures won?

Major income tax changes appeared on ballots in five states. Three proposals to raise or preserve top rates prevailed.

• Washington: Voters preserved the state's first personal income tax, a 9.9% levy on household income above $1 million, signed into law earlier in 2026.
• Colorado: Voters rejected Proposition 136, which would have capped the income tax rate at 4.4%. They approved Amendment 87, a graduated income tax raising rates on households and businesses earning over $500,000.
• California: Voters approved Proposition 3, making permanent the 2012 surcharges on top earners that were set to expire in 2031. The rates, adjusted annually for inflation, run from 10.3% on incomes of $360,000 up to 12.3% above $721,000.
• Missouri: In August 2026, voters overwhelmingly rejected a measure that would have forced lawmakers to eliminate the income tax, protecting $8.5 billion in annual revenue. The replacement, a higher sales tax, would have hit low-income taxpayers hardest.

The two losses came in North Carolina and Iowa. Both approved constitutional amendments making future taxes on the rich harder to enact. North Carolina Governor Josh Stein called his state's measure a "millionaire protection cap."

What did legislatures do?

Lawmakers acted before voters did.

• Maine legislators voted in April 2026 for a 1% surcharge on income over $1 million.
• In May 2026, Hawaii created a new 13% bracket for single taxpayers earning above $500,000, or couples filing jointly over $1 million, paired with lower rates for lower-income brackets.
• In June 2026, Rhode Island enacted a millionaires' surcharge, phased in over three years, reaching a maximum 3% rate.

New York State passed one of the first high-earner income taxes in 2009. Washington, D.C., Massachusetts and Maryland followed in 2022, 2023 and 2025, respectively.

How are states taxing second homes?

Special taxes on non-primary residences are spreading through legislatures and ballot boxes alike.

• Montana's tiered property tax system, approved in April 2025 and effective January 1, 2026, sets a 1.9% rate on vacation homes and short-term rentals, with lower tiered homestead rates for primary residences.
• New York City's "pied-à-terre tax" launched in July. It charges 0.8% to 1.3% annually on single-family homes valued at $5 million or more, and 4% to 6.5% on condos and co-ops above $1 million — but only on non-primary residences.
• Rhode Island's matching surcharge took effect the same month: $2.50 for every $500 of assessed value above $1 million on non-primary homes.
• Boulder, Colorado, voters approved a residential vacancy tax on November 3. Homes empty more than half the year will pay roughly $4,000 annually starting in 2028.

Not everything passed. A second-home tax failed in Crested Butte, Colorado. So did a similar vacant-homes surcharge in San Diego.

Why does taxing income beat taxing wealth?

Mechanics explain the pattern. Income taxes piggyback on existing annual filings, state or federal, so administrators need no extra valuation work. Wealth taxes demand annual appraisals of businesses, farmland, artwork and intellectual property — assets that are hard to price. Only death, when a large estate is left behind, forces a full wealth accounting.

The trade-off limits revenue. Most wealthy people convert little of their wealth into income, except when they sell stock. Property taxes split the difference: municipal assessments already value real estate every year.

What comes next?

More than 75% of voters in Cook County, Illinois — home to Chicago and several suburbs — backed a nonbinding referendum for a 3% surcharge on incomes over $1 million, the "millionaire amendment for property tax relief and education." The vote authorized nothing. It showed support is strong anyway.

Bill Gates has said he believes a "billionaire's tax" will be necessary. The open question after November is not whether states will tax the rich further, but through which instrument — a surcharge on income, a levy on paper wealth, or a bill aimed at the vacation home.