Economists Say California Property-Tax Changes Could Outraise Prop. 40 Over Time

Economists Owen Zidar and Eric Zwick argue that changing California’s property-tax system could generate more revenue over time than Proposition 40’s proposed one-time tax on certain taxpayers with wealth above $1 billion. Voters will decide on the measure Nov. 3.

Their hypothetical compares a 0.8% property-tax rate in California with a 2% rate in Texas. They argue that applying the higher rate would more than double California’s residential property-tax revenue. They do not specify a dollar amount or time frame for that increase. A separate 2024 calculation of effective rates on owner-occupied homes put California at 0.70% and Texas at 1.40%, using a different rate measure.

California recorded about $100 billion in statewide property-tax revenue in fiscal 2024-25, which ended June 30, 2025. Of that total, $53.5 billion went to schools and $46.5 billion went to counties, cities and special districts. The statewide figures include property beyond residential homes, so they do not provide a residential-only baseline for the economists’ comparison.

California’s 1978 Proposition 13 generally limits property-tax rates to 1% of assessed value and caps annual assessment increases at the lower of inflation or 2%. Assessments generally reset when a property is sold. The higher rate in Zidar and Zwick’s scenario is hypothetical and is not on the Nov. 3 ballot.

Proposition 40 would impose a one-time 5% tax on certain taxpayers with wealth above $1 billion. The measure’s official estimate projects tens of billions of dollars over several years. Economists who helped draft it estimate about $100 billion from 2027 through 2031, assuming 10% avoidance.

After administrative costs, 90% of Proposition 40 revenue would go to health care, with 10% directed to education and food assistance. Property taxes provide recurring revenue for schools and local governments across property types; Proposition 40 would raise money once for state programs.

Zidar and Zwick wrote, “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.”

California voters will decide on Proposition 40 Tuesday, Nov. 3.