California's Proposition 40, a ballot initiative that would impose a one-time tax on the fortunes of the state's billionaires, has drawn a full-court press from opponents who call it a "Trojan horse" that will eventually come for all Californians.

The measure lands against the backdrop of a state revenue system that is notoriously top-heavy, leaving California's coffers vulnerable to boom-and-bust cycles as the wealthiest residents see their incomes rise and fall with the stock market. In recent years, the top 1% of California households have accounted for roughly 40% to 50% of all personal income tax revenue, according to the conservative Hoover Institution. In 2021, when the stock market soared, the top 1% paid more than $60 billion in California personal income taxes. The flip side is that the state suffers crippling deficits when the market tanks, as it did during the Global Financial Crisis.

Prop 40 seeks to tax billionaires' wealth in addition to their incomes. Under California's direct-democracy system, statutes enacted by initiative generally cannot be changed by lawmakers unless the measure itself permits. The ballot initiative calls for residents worth more than $1 billion to pay a one-time tax equivalent to 5% of their assets. The union pushing the measure, the Service Employees International Union–United Healthcare Workers West, has said the wealth tax could raise $100 billion in revenue and help offset federal cuts to health spending.

Prop 40 includes a provision stating that the state legislature could modify it with a two-thirds vote—but only "if the statute is consistent with and furthers the purposes of the 2026 Billionaire Tax Act." Backers insist the tax is aimed solely at billionaires. Still, any changes would be up to state lawmakers, though courts would also weigh in on any attempts to stretch the scope to all taxpayers or extend it beyond a one-time levy.

The amendment question is not hypothetical. According to CalMatters, there have been numerous instances in which the state legislature has amended other ballot measures after they passed, and courts have at times upheld such changes and at times struck them down. In 1995, the state Supreme Court ruled lawmakers can make changes if they advance voters' original intent "by any reasonable construction," the report said. But in 2019, the Third District Court of Appeal rejected an attempt to amend the Political Reform Act, saying it "directly conflicts with a primary purpose" of the law.

Beyond amendment, nothing would prevent another ballot initiative in the future from taxing wealth to fund other spending priorities. And if Prop 40 succeeds, similar initiatives could pop up elsewhere. A group of Nobel laureate economists who support the measure have said it could "kick-start a movement" that spreads well beyond California.

In a letter signed by Daron Acemoglu, Abhijit Banerjee, Peter Diamond, Esther Duflo, Paul Krugman, and Joseph Stiglitz, the economists argued that while billionaires have "made important contributions," they have also been "amply rewarded" and have used loopholes to avoid taxes on capital returns, allowing their wealth to compound further. "As Californians head to the polls, their vote may well come to be seen as a turning point in the battle between democracy and oligarchy," the letter added.

Critics have warned the tax is unlikely to be a one-time deal and have raised alarms about the forms of wealth it would target, such as unrealized capital gains—the paper value of assets their owners have not yet sold—and privately held stock that is key for startups. Supporters point to the AI boom and say California's ultrarich would still be among the world's wealthiest. The Nobel laureates contend the tax will not doom Silicon Valley, saying California has attracted 80% of all new venture capital funding in the U.S. since the start of 2026, up from about 50% before 2025.

The measure has split the state's political and business leaders. Gov. Gavin Newsom is against it, while U.S. Rep. Ro Khanna is for it—though the congressman has conceded he does not want illiquid stakes or voting shares to be taxed. Some unions have also come out in opposition, saying other areas of state spending should be priorities as well. Meanwhile, Nvidia CEO Jensen Huang has said he is "perfect fine" with the tax, while Google cofounder Sergey Brin contributed over $100 million toward opposing the billionaire tax.

Further complicating the matter is competition from other measures headed for the same ballot that would nullify Prop 40. Proposition 41 would make any new taxes subject to the state's existing spending limit, while Proposition 42 would prohibit taxes on financial assets and personal property other than real estate. A recent poll from the Public Policy Institute of California found all three have support from a majority of voters.

"Supporters of Proposition 40, the so-called billionaire tax initiative, have a lot of work to do," Mark Baldassare, the survey's director, told KQED.

This story was originally featured on Fortune.com.