California voters will soon decide on Proposition 40, but looming over the controversial billionaire wealth tax proposal is another statewide ballot measure from nearly 50 years ago — and economists argue that undoing it could raise more revenue than the billionaire tax itself.

In 1978, voters approved Proposition 13, which capped property taxes at just 1% of assessed value, limited annual hikes to 2%, and allowed reassessments to market value only after sales or substantial renovations. In practice, that means longtime owners can be taxed on decades-old purchase prices, while recent buyers pay assessments set to current market values for comparable homes. The measure passed amid a wider tax revolt leading up to Ronald Reagan’s election as president and an era of conservative governance in America. Because Proposition 13 was enacted as a constitutional amendment, undoing it would require another statewide vote.

After Prop 13’s passage, the state had to find other ways to raise revenue and leaned increasingly on taxing incomes, including capital gains. California now has the most progressive income-tax structure in the country, with a top marginal rate of 13.3% — a figure that can climb above 50% when combined with federal income taxes. The top 1% of earners account for up to half of state revenue, which leaves state coffers volatile and swinging on stock market returns. At the same time, the ultra-wealthy often receive little income, instead leveraging assets to finance their lifestyles and avoiding some taxes.

Enter the billionaire tax. Prop 40 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 has said the wealth tax could raise $100 billion in revenue and help offset federal cuts to health spending. As a one-time levy, it would not create a recurring revenue stream for future budgets. Supporters point to the AI boom and say California’s ultra-rich would still be among the world’s wealthiest. Opponents have warned about the tax’s impact on economic growth and startups, saying it would force founders to sell big pieces of their companies and eventually cause the wealthy to flee to another state, resulting in a net loss of revenue over time.

If California is looking for a large source of undertaxed wealth, “a much better, bigger target lies right beneath their feet,” according to Princeton economist Owen Zidar and University of Chicago Booth School of Business economist Eric Zwick, authors of the book The Everywhere Millionaire.

“The original sin underlying California’s tax structure is Prop 13, the 1978 law that rewrote the rules of property ownership,” they wrote in a recent New York Times op-ed. “Getting rid of it would be a more efficient and durable way to make the rich pay their fair share.”

Prop 13 has also contributed to rapidly increasing home values, which have risen faster than property taxes. As a result, California homeowners pay an average of just 0.8% tax on their property, Zidar and Zwick estimated, generating $100 billion in revenue in fiscal 2025. By contrast, Texas homeowners pay 2% on average. If California matched Texas, overall residential property tax revenue would more than double, while also easing home prices by around 13%, they added.

To be sure, property taxes in Texas have stirred their own voter revolt during the midterm election season. While the state does not levy income taxes, Texans complain that the overall tax burden remains onerous due to property taxes, which are levied by local governments as well.

Repealing Prop 13 in California would not go down well with voters either, since many homeowners would suffer big increases on their property taxes. Still, the state’s tax base is already narrow, and Prop 40 would make it even more top-heavy. Meanwhile, California plans to spend $540 billion this fiscal year — meaning the $100 billion Prop 40’s backers project, even if collected in full, would cover less than a fifth of a single year’s spending.

“It is simply not possible to fund the state’s needs by leaning on a few hundred people, as politically appealing as that may be,” Zidar and Zwick argued. “For California to tax wealth in a progressive fashion and meaningfully improve its fiscal position, it needs to broaden the aperture beyond billionaires to the hundreds of thousands of other very wealthy people who could easily afford to contribute more by paying a real estate tax that finally works.”

Laura Tyson, a former White House economic adviser, and Lenny Mendonca, a former chief economic adviser to California Governor Gavin Newsom, raised a separate warning. Billionaires respond strongly to estate taxes when deciding where to live, they noted in a Project Syndicate column, pointing out that six billionaires who would have owed about one-quarter of Prop 40’s expected revenues left the state before the proposed effective date of the wealth tax.

And because Prop 40 proposes a new, untested method of taxation based on all assets, they wrote, it would fuel a “tidal wave of litigation, rendering the promised funding both speculative and unreliable.”

“Instead of a tax on billionaires, the U.S. needs to raise taxes on the capital income that feeds wealth,” Tyson and Mendonca argued. “There are a variety of ways to do so: through higher corporate tax rates; through taxes on realized and unrealized capital gains; by closing the most egregious loopholes, like carried interest; and by increasing inheritance taxes.”

Either way, the question of how California taxes wealth — whether by leaning on a few hundred billionaires or broadening the base across hundreds of thousands of homeowners — now moves to the state’s voters, with Proposition 40 the first decision at the ballot box.

This story was originally featured on Fortune.com.