Financial Planning reported in a story published on 6 November that advisors should prepare for more wealth tax proposals, even though California's Proposition 40 appeared headed for defeat. The measure would have imposed a one-time 5% tax on California billionaires. When the story ran, more than 30% of ballots were still uncounted, according to the outlet.
The article argues that Democratic gains, public sentiment and states' need for revenue suggest lawmakers are not finished with plans to tax their wealthiest residents. It draws mainly on advisor commentary, including Paul Karger, co-founder and managing partner of Boston-based RIA TwinFocus; Jordan Kienzle, a partner at Baker Street Advisors in San Francisco; Gabriel Shahin, principal and founder of Falcon Wealth Planning in Ontario, California; and Troy Owens, a partner at AlphaCore Wealth Advisory in San Diego.
Early counts cited by CNBC as of 4 November showed the measure trailing, with 56% voting no and 44% voting yes, though other reports gave 45% and 46.26% yes, a discrepancy the sources do not resolve. Decision Desk HQ projected on 6 November that it would fail. The measure was sponsored by SEIU-UHW, which said it would try again in 2028. CalMatters reported that opponents spent about $316.7 million on the campaign, including a $102 million donation from Sergey Brin to the opposition committee Building a Better California. Those are campaign spending figures.
A separate measure, Proposition 42, would ban new wealth taxes. CalMatters showed Proposition 42 ahead at roughly 54%, with close to 60% of ballots tallied. Voters could later undo it through another ballot measure, so it could be reversed by a future vote. Mission Local reported that Proposition 40 was estimated to affect about 200 billionaires. The Hoover Institution estimated a net loss of almost $25 billion from the tax, while the nonpartisan Legislative Analyst's Office put likely revenue in the tens of billions over multiple years, far under the union's $100 billion estimate.
On the federal side, CNBC reported that Khanna and Sanders have proposed an annual 5% tax on net worth above $1 billion, in a measure named the Make Billionaires Pay Their Fair Share Act. Yahoo Finance reported an earlier plan from Van Hollen that would raise the top income rate to 49%. Forbes, citing the Tax Foundation and other analysts, reported that constitutional hurdles, including rules on direct taxes and apportionment, stand in the way of a federal wealth levy.
TwinFocus, the Boston firm whose principal Paul Karger is quoted in the Financial Planning piece, is an SEC-registered investment adviser that has been registered since 23 May 2006, according to its filings. Its Form ADV Part 2A for 2023 shows $3.59 billion in regulatory assets under management, and the firm was founded in 2006 by twin brothers Paul and Wesley Karger, according to Wikipedia. Karger said in Financial Planning that roughly half of TwinFocus's Massachusetts clients have departed since the state's 4% surtax took effect in 2023. That is Karger's own claim, and it has not been independently verified.
For advisors, the practical question is how to model residency, liquidity and tax exposure for clients who could be affected by such proposals, a type of planning conversation that tends to follow a high-profile ballot fight. Economists at Berkeley and Stanford are weighing the next steps for wealth taxes, among them the 2028 Democratic primary, per the Berkeley Law news site. Whether any of the federal or state proposals advance will depend on legislative action that has not yet occurred.