Property-Tax Overhaul Could Outraise Prop 40
California property owners should watch how a November 3 vote on Proposition 40 could reshape the state's property-tax base.
Updated on Oct. 31, 2026 in Regional Economics
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Economists Owen Zidar and Eric Zwick argue that changing California's property-tax system could raise more revenue than Proposition 40, a one-time 5% tax on taxpayers with wealth above $1 billion that voters decide on November 3. Their argument rests on a hypothetical higher property-tax rate that is not on the ballot.
Why it matters
The analysis reframes a wealth-tax debate around the state's existing property-tax base, which already generated about $100 billion in fiscal 2024-25. For businesses operating in California, the debate touches on how property assessments and tax rates could shift the cost of owning commercial and residential real estate.
California recorded about $100 billion in statewide property-tax revenue in fiscal 2024-25, with $53.5 billion going to schools and $46.5 billion to counties, cities and special districts. The economists' scenario compares California's 0.8% rate with a 2% rate in Texas, while the 2024 effective owner-occupied rates were 0.70% in California and 1.40% in Texas.
The players
Owen Zidar
Economist who co-authored the analysis arguing California's property-tax system could raise more revenue than Proposition 40.
Eric Zwick
Economist who co-authored the analysis and helped draft Proposition 40's revenue estimates.
The details
Proposition 13, passed in 1978, 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, so the effective tax burden varies widely between long-held and recently purchased properties. The economists' argument is that a broader property-tax rate increase could generate more revenue than the one-time wealth tax in Proposition 40, whose proceeds would go 90% to health care and 10% to education and food assistance after administrative costs.
Timeline
Fiscal 2024-25, which ended June 30, 2025, produced about $100 billion in statewide property-tax revenue.
Economists estimate about $100 billion in Proposition 40 revenue from 2027 through 2031, assuming 10% avoidance.
Voters decide on Proposition 40 on Tuesday, Nov. 3.
Market Landscape
The debate sits against Proposition 13's 1978 limits on property-tax rates and annual assessment increases, which shape how much revenue the state collects today. The proposal to adjust the property-tax system instead of relying on a one-time wealth tax reflects a competing approach to the same state revenue base.
Operators who own California real estate should track how Proposition 40 and any future property-tax changes could alter assessment and holding costs. Owners should consult qualified counsel or an accountant before adjusting long-term property strategy based on the outcome.
The takeaway
Property-tax revenue remains a large and stable base for California's schools and local governments, so changes to it carry broad budget effects. Operators should calendar the November 3 vote and monitor how the result shapes state revenue policy.
What happens next
Voters decide on Proposition 40 on Tuesday, Nov. 3.
Further reading
For more on how state revenue systems shape regional budgets, see Regional Economics coverage of California.
Source note: This article includes information reported by TokenPost.
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Should California raise property taxes instead of taxing the wealthiest residents?
