Six Nobel Prize-winning economists have endorsed a California ballot initiative that would impose a wealth tax on the state's billionaires, arguing the measure could set off a broader push that spreads to other U.S. states, the federal government, and other countries.

In a letter published Saturday, the economists backed Proposition 40, which would require California residents worth more than $1 billion to pay a one-time tax equal to 5% of their assets. Unlike an income tax, a wealth tax applies to net worth itself—reaching gains that may never appear as taxable income in a given year.

The signatories—Daron Acemoglu, Abhijit Banerjee, Peter Diamond, Esther Duflo, Paul Krugman, and Joseph Stiglitz—have each previously supported wealth taxes or higher income taxes on the ultra-wealthy.

"California is the right place to take this historic step," they wrote. "The explosive growth of the state's billionaires over the past few decades has made it one of the most unequal places in America."

The economists estimated that California's roughly 250 billionaires are collectively worth $2.3 trillion. According to their letter, the state income taxes those billionaires paid amounted to only 1.6% of the $1.4 trillion in wealth they gained between 2019 and 2025. Their ranks could keep growing: SpaceX went public in June, Anthropic is planning an IPO later this year, and OpenAI may follow next year.

While billionaires have "made important contributions," the letter added, they have also been "amply rewarded" and have used loopholes to avoid taxes on capital returns, allowing their wealth to compound further.

A divided state

Opponents warn the tax could weigh on economic growth and startups, and say it would force founders to sell large pieces of their companies. Supporters point to the AI boom and argue California's ultra-rich would still rank among the world's wealthiest after paying it.

The measure is being championed by the Service Employees International Union–United Healthcare Workers West, which says the wealth tax could raise $100 billion in revenue and help offset federal cuts to health spending.

The ballot initiative has split California's political and business leaders. Gov. Gavin Newsom opposes it, while U.S. Rep. Ro Khanna supports it—though the congressman has conceded he does not want illiquid stakes or voting shares to be taxed. That distinction matters because much of a billionaire's wealth is held in private company shares rather than cash, which is why even some backers of taxing the ultra-rich draw the line at those holdings. Some unions have also come out against the measure, arguing other areas of state spending should be priorities too.

Among business figures, Nvidia CEO Jensen Huang has said he is "perfectly fine" with the tax, while Google cofounder Sergey Brin has contributed more than $100 million to the campaign against it.

The Nobel laureates argued the tax will not doom Silicon Valley, noting that California has drawn 80% of all new venture capital funding in the U.S. since the start of 2026, up from about 50% before 2025. That is despite fears of the tax first surfacing among billionaires in late 2025.

A movement beyond California

Critics of Prop 40 have also warned that California's levy is unlikely to remain a one-time deal—and the letter embraces the prospect of a similar levy on billionaires elsewhere.

"If the state that houses some of the country's most powerful billionaires votes to tax their wealth, it will kickstart a movement to tax ultra-high-net-worth individuals in other states — and eventually at the federal level and in other countries," the economists wrote. "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."

Narrow margin heading into November

Californians are narrowly divided on the wealth tax, and passage could come down to the wire when voters cast ballots in November. A recent poll from the Public Policy Institute of California found that 52% of likely voters would vote yes on the tax, while 46% would vote no.

At the same time, competing ballot measures that would nullify Prop 40 also have majority support. Proposition 41, which would make any new taxes subject to the state's existing spending limit, leads 51% to 44%. Proposition 42, which would prohibit taxes on financial assets and personal property other than real estate, is ahead 54% to 43%. Because both measures would nullify Prop 40, the wealth tax's ultimate fate could hinge on how the dueling propositions fare on the same ballot, not just on its own vote total.

"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.