What is it?

Prop 42 bans two kinds of new state taxes: taxes on simply owning retirement holdings and other personal savings, and retroactive taxes that reach back to before they took effect.

The ownership ban covers retirement accounts, investments, and essentially everything else a person can own. It blocks taxes on simply owning these things; earning, selling, or withdrawing money can still be taxed, so income and capital gains taxes are unchanged. Taxes already on the books before 2026 are untouched.

The retroactive ban means a new state tax could not reach back and bill you based on conduct, activities, or a status (including where you lived) from before it took effect. Both bans cover any state law or constitutional provision enacted on or after January 1, 2026, including statewide initiatives on the same ballot as Prop 42 itself.

Competing measure

Prop 40, on this same ballot, would impose a one-time 5% tax on the net worth of Californians worth $1B or more. Under Prop 42's conflicting measures clause, a same-ballot initiative that taxes the ownership of these assets, or taxes conduct or status from before its effective date, is deemed in conflict. If Prop 42 gets more yes votes, all provisions of the other measure become null and void.

Read the full annotated legal text →