California Weighs a Billionaire Tax, a Permanent Top Rate and Faster CEQA Review; Arizona Votes on Grocery and Mileage Taxes

The bottom line today

What does Tuesday’s ballot do to the cost of running a business? In California, a great deal. In Arizona, a little, and mostly in the right direction. California voters face a one-time wealth tax, a constitutional ban on taxes like it, a permanent top income tax rate and a rewrite of environmental review deadlines, all on one ballot [1]. Arizona voters decide two tax limits the Legislature sent them: a cap on city grocery taxes and a ban on mileage-based fees [2, 3]. No predictions here. Just what each measure says, and who pays.

CA California Proposition 40: a one-time 5% tax on billionaires

What it does. Proposition 40, an initiative, imposes a one-time state tax equal to 5% of net worth on people worth more than $1 billion who were California residents on January 1, 2026 [1]. The tax is due in 2027, with an option to spread payments over five years at a higher cost [1]. Covered assets include businesses, securities, art and intellectual property; real estate and most pensions and retirement accounts are excluded [1]. Ninety percent of the money goes to health care, and the revenue is exempt from the school funding guarantee, reserve rules and the state spending limit [1].

Pratt’s read. The rate gets the headlines. The valuation rules are the business story. A stake in a private company is presumed worth the entity’s book value plus 7.5 times its average book profits over three years, and a founder’s ownership share is presumed to be no less than his or her share of voting control [1]. Getting off that formula takes clear and convincing evidence and a certified appraisal [1]. For a founder holding super-voting shares in a profitable private firm, that is a tax on control, payable in cash the company may have to supply.

The Legislative Analyst expects “tens of billions of dollars” spread over several years, and a possible ongoing loss of less than $1 billion a year in income tax if billionaires leave [1]. Supporters, led by SEIU-United Healthcare Workers West, say about 200 people would pay and that the money replaces federal health care cuts [1]. The ballot argument against lists Gov. Newsom, the California Chamber of Commerce, the California Teachers Association and the California Medical Association among its backers, and argues that departures of wealthy residents would cost the state more than the tax brings in [1]. When a teachers’ union and a business chamber land on the same side of a tax, the design deserves a second look.

CA California Proposition 42: no new taxes on assets

What it does. Proposition 42 bars new state taxes on personal property, “including business interests, intellectual property, and financial assets,” and new state taxes that apply retroactively to conduct or status before their effective date, for taxes enacted or taking effect on or after January 1, 2026 [1]. If it gets more yes votes than Proposition 40, the Analyst says courts could find the two conflict and block Proposition 40 [1].

Pratt’s read. This is the cleanest pro-growth measure on any ballot this year. The Analyst’s only fiscal finding is that revenue may not rise as much in the future [1]. Investors deciding where to build a company want to know the state cannot tax their equity on paper, retroactively, by initiative. Proposition 42 says so.

CA California Proposition 3: the “temporary” top rates become permanent

What it does. Proposition 3 makes permanent the higher rates voters approved in 2012 and extended in 2016: 10.3%, 11.3% and 12.3% on income above about $371,000 for single filers and $742,000 for joint filers [1]. Without it, those brackets fall to 9.3% after 2030 [1]. The Analyst puts the revenue at $5 billion to $15 billion a year, swinging with the stock market [1].

Pratt’s read. Teachers, firefighters and school employees argue the measure “does not raise your taxes,” and for wage earners that is accurate [1]. The cost is in what employers lose: a scheduled three-point cut at the top, which is where owners of pass-through businesses report their profits. The California Taxpayers Association, the Family Business Association of California and the California Hispanic Chambers of Commerce signed the argument against [1]. Voters were told twice these rates were temporary. Permanence is a new tax decision, and it should be judged as one.

CA California Proposition 45: deadlines for environmental review

What it does. Proposition 45 gives listed “essential” projects (housing, water, clean energy other than nuclear, health facilities, public safety stations, wildfire work, broadband, schools and transportation other than high-speed rail) an optional faster track [1]. Agencies must finish an environmental impact report within 365 business days, judge impacts by the standards in place when the application was filed, and specify up front what an application needs [1]. The applicant may offer a single alternative. Courts could halt only the part of a project whose review was deficient, not the whole project [1]. The Analyst estimates initial state and local costs in the high tens of millions of dollars a year, possibly above $100 million, partly covered by fees [1].

Pratt’s read. Fixed deadlines and a narrower remedy are what every builder in California has asked for. The opponents, including the Coalition for Clean Air and Clean Water Action, say it limits public review and weakens air and water protections, and their argument says the California Chamber of Commerce wrote it [1]. Supporters answer that it exempts no project from review and leaves every environmental law in place [1]. The gap is in the list: factories, warehouses and data centers are not on it [1]. Advanced manufacturers at least have the 2025 exemption the governor declined to rewrite in September, as this release reported at the time (September 22 release).

AZ Arizona Proposition 316: a 2% ceiling on city grocery taxes

What it does. HCR 2021 amends the statute on city sales taxes on food for home consumption [2]. A city that taxed groceries by January 1, 2025 at less than 2% could raise the rate only with voter approval and only to 2%; a city at 2% or more could not raise it [2]. A city without a grocery tax would need voter approval to adopt one, capped at 2%, and no increase may occur in the 24 months before June 30, 2027 [2]. It passed the House March 4, 2025 and the Senate June 20, 2025 [2].

Pratt’s read. Grocers get a stable rate and their customers get a lid. Phoenix, Mesa and Tucson do not tax groceries, KJZZ reported, but some small rural towns charge 3% to 4%, and those taxes make up roughly a fifth of their revenue [4]. The League of Arizona Cities and Towns says the loss of that lever forces cuts or other taxes [4]. That is the cost to watch: if cities look elsewhere, restaurant and retail sales tax rates are the obvious place.

AZ Arizona Proposition 141: no mileage-based taxes

What it does. SCR 1004 would add a section to the Arizona Constitution barring the state and every local government from imposing a tax or fee based on vehicle miles traveled, or any rule to monitor or limit miles driven without the driver’s consent [3]. It exempts interstate agreements for commercial vehicle fuel taxes and registration fees, and government vehicles [3].

Pratt’s read. The businesses that log the most miles, such as fleets, delivery firms and farm operations, gain the most certainty. The exemption keeps the interstate fuel tax and registration systems truckers already use [3]. The counterargument is real: gas tax revenue is shrinking as vehicles get more efficient, and Democratic opponents, as KJZZ summarized their case, call it irresponsible to take a funding option off the table when roads need repair [4]. Banning one tool leaves the fuel tax and registration fees, which land on the same fleets.

On the calendar

Polls in California close at 8 p.m. on Tuesday, November 3 [1]. If Proposition 40 passes, the tax falls due in 2027 [1]. Arizona’s grocery tax rules key to June 30, 2027 [2]. Proposition 3’s rates otherwise run through 2030 [1].