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 →

Why vote Yes?

Prop 42 closes a door that should never have been open: taxing Californians on wealth they have not realized and may never see. It bars new state taxes on owning savings and assets and bars retroactive taxes that reach back to conduct or residency before a law takes effect. Every existing tax stays: when you sell stock, collect royalties, or cash out a business, California taxes you today and will tax you the same way after Prop 42.

Ownership taxes fail on their own mechanics. Assets without market prices cannot be fairly valued, illiquid holdings force owners to sell or borrow to pay bills on paper gains that may evaporate, and retroactive taxes break the basic bargain that rules are known before they bind. These defects are not hypothetical: they are why Prop 40, this ballot's one-time wealth tax, needs installment schedules, deferral mechanisms, and appraisal fights just to function.

This is a constitutional lockout, and we are generally wary of those. But defining what kind of thing the state may tax is exactly what constitutions are for: the federal income tax required an amendment to exist, Prop 13 already caps property tax rates, and a future majority can amend this the same way this majority enacts it.

Know what you are voting on, though. Prop 42 was funded almost entirely by Building a Better California, the committee backed by Sergey Brin and other tech founders, and its protected-asset list (business interests, digital assets, intellectual property) reads like their portfolios. It also carries a clause that voids Prop 40 outright if Prop 42 gets more yes votes. We oppose Prop 40 on its own merits, so neither changes our vote. Judge the text, not the donors.

Prop 42 keeps every tax California has and stops only the ones that tax you for owning what you already earned. Vote yes.