IN CASE YOU MISSED IT
New Hoover Paper Argues That California's 2026 Billionaire Tax Act Is Unconstitutional

The Hoover Institution has released a new paper, finding that Prop 40 may violate the U.S. Constitution on multiple fronts. It also exposes what Prop 40’s backers aren’t telling voters: the measure is built to be expanded.

Authored by economists Joshua Rauh, Benjamin Jaros, and visiting scholar Aharon Friedman, the report found that Prop 40 may be in violation of several key constitutional clauses and could function as an unconstitutional Bill of Attainder. Their bottom line: California voters would be approving what amounts to “a retroactive, worldwide property tax on the stock of wealth,” followed by years of litigation with no guarantee that a dollar is ever collected.

And the fine print is even worse. Prop 40 lets Sacramento politicians rewrite the tax with a two-thirds vote of the Legislature, including the rate, the $1 billion threshold, and even the promise that it’s one-time, without ever going back to voters.

Prop 40 is sold as a one-time tax on a handful of billionaires. Its own text gives Sacramento the tools to make it neither. That’s if it even survives in court.

Read excerpts of the Hoover Institution’s release, “New Hoover Paper Argues That California’s 2026 Billionaire Tax Act Is Unconstitutional,” below. Read the full paper, “The 2026 Billionaire Tax Act and the Constitution: Retroactivity, Residency, and the Limits of California’s Taxing Power.”
 

“As Friedman described, ‘The BTA [Billionaire’s Tax Act] contains serious legal vulnerabilities under the Constitution, and not just under the Due Process and Commerce Clauses under which state tax provisions are often litigated. The BTA’s targeting of specific individuals, including its purporting to prohibit Congress from allowing a federal income tax deduction for BTA tax liability, also raises concerns under the Takings Clause and the prohibition against Bills of Attainder.’

“The paper identifies the lack of connection between the wealth being taxed and California’s jurisdiction over it as a fundamental Constitutional flaw of the BTA. Taxing a person’s worldwide wealth as measured on December 31, 2026, based on the person’s residence in California as determined on a single day, January 1, 2026, violates the Constitution’s protections of Due Process. The tax applies regardless of whether the wealth is located in California or whether the wealth was generated while the person was a California resident.

The authors argue that the constitutional defects are so severe that the BTA will be struck down under the Constitution. The flaws are not just technical details but structural problems that go to the heart of what and whom a state may tax. They say that the proposal has become a test case for whether jurisdictions across the US can tax wealth.”

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About Californians Against Tax Increases
Californians Against Tax Increases is a broad coalition of taxpayer, small business, and community leaders united to defeat Proposition 40, the Everyone Tax. To learn more, visit VoteNo40.com.

Paid for by Californians Against Tax Increases, Sponsored by the California Business Roundtable – No on 40. Ad committee’s top funder: California Business Roundtable.