The Question

Should personal financial assets and personal property be protected from new or retroactive state taxes?

The Situation

Personal Property as defined by the State includes everything an individual owns, including personal financial assets, business interests, retirement accounts, jewelry, boats, and cars. Some Personal Property is taxed; e.g., cars and trucks (state) or boats and business equipment (local). There is currently no prohibition against taxing Personal Property. 

Personal financial assets are not taxed. The mere ownership or control of an asset is not currently taxed. 

Proposition 42 is an Initiative Constitutional amendment put on the November 2026 ballot by Building a Better California.

The Proposal

Prop 42 will prohibit any future provisions to the Constitution that would authorize new taxes on personal financial assets or personal property, on or after January 1, 2026 (including other measures on the November 2026 ballot). The prohibition on new taxes includes the ownership of retirement savings, personal assets, investments, and other financial assets; assets used to collect or produce income for retirement or financial planning; and assets held directly by an individual or indirectly through Trusts or Investment vehicles. The measure is intended to protect the assets previously held and any interest generated by the assets from future taxation. Retroactive taxes, taxes on past actions or earnings, would be prohibited.

Fiscal Effects

This measure would have the following major fiscal effects:

• The measure restricts the options the state government will have to raise taxes in the future. 
• Possibility that tax revenues will be lower in the future.
• When and by how much future revenues would be reduced is unclear.

CONFLICTING PROPOSITION

Prop 40, The Billionaire Tax Act 2026, would be a special tax on personal property and personal financial assets, or a wealth tax. If Prop 42 passes, with more votes than Prop 40, it could nullify Prop 40.

Supporters Say

• Californians already pay the highest taxes.
• A fiscally strapped Legislature is always looking for new revenue streams and retirement savings could be next.
• Retroactive taxes are unfair to people who are planning their budgets and making decisions based on ‘rules at the time’.
• The tax on “net worth” or everything you own, in the Billionaires Act could be expanded over time to reach taxpayers who are not billionaires. 

Opponents Say

• Voters for the Billionaire’s Tax Act may not realize that only one can win and that a vote for Proposition 40 and 42 won’t necessarily grant them 2 wishes.
• Proponents may be eager for the prohibition against new taxes even though retirement instruments are excluded from the Billionaire’s Tax Act. A non-existent threat to stir up voters.