Prohibits New State Personal Property Taxes and Certain Retroactive State Taxes

How it works

1. What kind of measure this is: Proposition 42 is an initiative measure submitted to the people under Section 8 of Article II of the California Constitution. It adds sections to the California Constitution, so the new provisions are printed in italic type in the voter guide. It adds Article VIII to the California Constitution, containing two sections: a prohibition on taxing retirement holdings, individually owned assets and other forms of personal savings, and a prohibition on retroactive taxes. The act itself is titled the Retirement and Personal Savings Protection Act of 2026 and also carries the additional title Retirement and Personal Savings Protection Act. The Secretary of State prints the measure as Proposition 42, Prohibits New State Personal Property Taxes and Certain Retroactive State Taxes. Initiative Constitutional Amendment, and the Secretary of State's contribution totals page uses the same title.^{S1S4S7S8S12S14}
2. Path to the ballot: the Institute of Governmental Studies reports that the measure began as Initiative #25-0039A1, filed with the California Attorney General's Office. Ballotpedia reports the timeline: filed December 8, 2025 by Kurt R. Oneto, cleared for signature gathering February 11, 2026, the Secretary of State reported the campaign had collected 25 percent of the required signatures on March 20, 2026, the campaign submitted signatures on May 4, 2026, and the Secretary of State reported the initiative had qualified for the ballot on June 24, 2026. Ballotpedia reports that 874,641 valid signatures were required for an initiated constitutional amendment, that the campaign submitted 1,638,055 signatures and that the final random sample count determined 1,044,143 of them were projected to be valid. Ballotpedia reports that the sponsors hired Florida Petition Management LLC, Voter Direct Inc., Plain Dan Solutions Inc., Pen to Paper Canvassing, JBPM and LLC to collect signatures, and that $32,267,139.12 was spent to collect the required signatures, a cost of $36.89 per required signature.^S12S14
3. Prohibition on taxing retirement holdings, individually owned assets and other forms of personal savings: Article VIII, Section 1 provides that no state law and no provision of the California Constitution enacted on or after January 1, 2026 may enact, create, impose or authorize collection of a tax on the ownership or control of retirement holdings, individually owned assets and other forms of personal savings, whether a person holds them directly or indirectly. Section 1 also provides that nothing in it alters or limits the imposition or collection of any tax that was in effect, imposed and first collected on or before December 31, 2025, and that nothing in it alters or affects the taxation of real property as provided in other provisions of the California Constitution.^S7S14
4. Prohibition on retroactive taxes: Article VIII, Section 2 provides that no state law and no provision of the California Constitution enacted on or after January 1, 2026 may enact, create, impose or authorize collection of a tax that operates retroactively to result in tax liability based on conduct, activities or a status that occurred or was present before the effective date of the law or constitutional provision. It adds that the same rule applies to a tax imposed on a taxpayer based on the taxpayer's residency status on a date before the tax took effect. Existing taxes in effect, imposed and first collected on or before December 31, 2025 are not affected. The section creates one exception: the retroactivity prohibition does not apply to a tax imposed by a statute passed by the Legislature on or after January 1, 2026 if the tax does not apply retroactively for more than 365 days before the statute takes effect and at least one of two conditions is met, either the Governor declares an emergency as a result of a fire, flood, storm, civil disorder, earthquake, volcanic eruption or actual or imminent attack by a foreign enemy with the revenue expressly limited to responding to that emergency, or the Governor declares a fiscal emergency under subdivision (f) of Section 10 of Article IV with the revenue expressly limited to responding to that fiscal emergency.^S7S14
5. What the measure defines as protected assets and as a tax: Article VIII, Section 3 defines retirement holdings, individually owned assets and other forms of personal savings to mean pensions; retirement accounts including but not limited to 401(k) accounts, 403(b) accounts and all other individual retirement accounts; mutual funds; and all personal property, whether tangible or intangible, including but not limited to financial assets, investment accounts, business interests, digital assets, intellectual property, personal belongings, and other assets used to produce or collect income or savings for retirement or financial planning. The section defines a tax by reference to subdivision (b) of Section 3 of Article XIII A of the California Constitution. The California Budget and Policy Center reads the same list as covering financial assets such as bank accounts, stocks, bonds or mutual funds, retirement accounts, interests in businesses, intellectual property, and other personal property such as vehicles, jewelry, artwork and other movable physical property.^S7S14S20
6. Which measures the article applies to: Article VIII, Section 4 provides that the article applies to all statewide initiative measures submitted to the electors on or after January 1, 2026, including measures that appear on the ballot at the same election at which the measure adding the article is approved by the electors. The League of Women Voters of California Education Fund states that the prohibition applies to other measures on the November 2026 ballot as well as to future ones.^S7S13S14
7. Conflicting measures on the same ballot: Article VIII, Section 5 provides that if this initiative appears on the same statewide election ballot as another initiative measure that would establish, enact, create, impose or authorize collection of a tax on the ownership or control of retirement holdings, individually owned assets and other forms of personal savings, or that would enact a tax resulting in liability based on conduct, activities or a status from before the measure took effect, that other measure is deemed to be in conflict with this measure. If this measure receives a greater number of affirmative votes, its provisions prevail in their entirety and all provisions of the other measure are null and void. Section 5 also provides that if this measure is approved but superseded in whole or in part by a conflicting measure approved at the same election and that conflicting measure is later held invalid, this measure is self-executing and given full force and effect. The official title and summary states that other voter-approved measures appearing on the same ballot are void if they conflict with this measure and this measure receives more affirmative votes. The Legislative Analyst states that if Proposition 42 receives more yes votes than Proposition 40 on the same ballot, Proposition 40 could be stopped from becoming law even if it gets yes votes from a majority of voters, because the courts could find that Proposition 42 conflicts with Proposition 40.^S1S3S7S12S14
8. Severability, effective date and construction: the act's provisions are severable, the act takes effect at the earliest possible date under Section 10 of Article II and becomes operative on the same day it takes effect, and the act is to be liberally construed to give effect to its intent and purposes.^S7
9. Legal defense and standing: the act includes a provision stating that if the act is approved and later challenged and both the Governor and the Attorney General refuse to defend it to the fullest extent possible, the Attorney General must appoint independent counsel to defend it, must exercise due diligence in determining the qualifications of that counsel and obtain a written affirmation that counsel will faithfully and vigorously defend the act, and that affirmation must be made publicly available immediately upon request. The act makes a continuous appropriation from the General Fund to the Controller, without regard to fiscal years, in the amount necessary to cover the costs of retaining independent counsel for that purpose.^S7
10. Background the Legislative Analyst gives for the measure: both the state and local governments tax the ownership of certain personal property, which is all the things people own other than real estate, and those taxes are based on the property's value. The Legislative Analyst gives two examples: the vehicle license fee that car and truck owners pay to the Department of Motor Vehicles each year, which is a state tax, and the property taxes owners of business equipment pay to the county each year, which is a local tax. The Legislative Analyst also states that the ownership of many types of personal property is not taxed, and that one major example is financial assets like stocks and investment accounts: although the state does tax income people make from those financial assets, there is no tax for simply owning them. The California Budget and Policy Center states the same point and adds that the ownership of assets is generally not taxed in California except for local property taxes on real estate, which are already limited by Proposition 13 of 1978, some types of personal property including boats, planes and business equipment, and state vehicle license fees.^S2S3S20
11. The findings printed in the act: the act declares that California families are paying more for everything and already pay some of the highest taxes in the country; that a recent analysis by a nonpartisan research institute concluded that California ranks 3rd worst in the nation in subjecting its population to taxes when considering individual income taxes, sales taxes, property taxes and other forms of taxation, behind only New Jersey and the District of Columbia; that California also has the highest state sales tax in the nation, the highest top income tax rate and the highest tax on gasoline, among other indicators; that Californians face an affordability crisis in housing, food, electricity, health care, home and auto insurance and other necessities, and that a recent analysis suggests Californians would need $2.3 million saved to retire comfortably for 20 years; that politicians and special interest groups want to start taxing retirement holdings, individually owned assets and other forms of personal savings; that defined-benefit pension holders could be taxed on the future value of their benefits before collecting anything, and that 401(k), individual retirement account and investment holders could be taxed on the value of their retirement savings; that California already imposes income, capital gains, real property, personal property, corporation, sales and use and real property transaction taxes; that retroactive taxes disrupt retirement and financial planning; and that Sacramento politicians and special interests have wasted billions of dollars on inefficient and ineffective programs and do not need to tax retirement holdings or tax people retroactively based on past conduct, activities or status. The competing finding printed for Proposition 41 on the same ballot describes California as ranking 48th in the nation when considering individual income taxes, sales taxes, property taxes and other forms of taxation; the two findings are printed as the findings of the respective measures.^S7
12. The statement of purpose printed in the act: the act states that the purpose and intent of the people of California is to protect Californians' ability to save for their futures by prohibiting the imposition of new taxes on personal property, including the ownership or control of retirement holdings, individually owned assets and other forms of personal savings, as well as requiring all new taxes to apply only prospectively.^S7
13. What the measure does not do: Proposition 42 does not impose or raise any tax, and it does not change the rate or base of any tax that was in effect, imposed and first collected on or before December 31, 2025. It does not change the taxation of real property, so property taxes on homes and the property tax rules of Proposition 13 are not altered. It does not repeal the vehicle license fee or county property taxes on business equipment, which the Legislative Analyst describes as examples of existing taxes on personal property ownership. It does not change the income tax, including the tax on income a person receives when selling an asset or the tax on withdrawals from a retirement account, because the measure bars taxes on the ownership or control of assets rather than on income those assets produce. The California Budget and Policy Center states that California, like the federal government, taxes the income people receive when they sell their assets but does not tax the growth in value of assets they hold, and that Proposition 42 would enshrine the current practice of not taxing ownership of financial assets in the state Constitution. The measure does not apply to federal taxes and does not create any filing, reporting or record keeping requirement for individuals or businesses.^S2S3S7S20

Fiscal impact

The Legislative Analyst's summary of the estimate of net state and local government fiscal impact is the possibility that tax revenues will not go up as much in the future. The analysis states that Proposition 42 restricts the options the state has to raise taxes in the future, that this could make it somewhat harder for the state to raise taxes, and that this could reduce future tax revenues, with the timing and size of any reduction unclear.

The analysis gives no estimate of a dollar amount. The League of Women Voters of California Education Fund states the same three fiscal points and adds that the measure restricts the options the state government will have to raise taxes in the future. The California Budget and Policy Center states that the measure would make it harder for state leaders to raise revenues from wealthy households and to adapt quickly to changing circumstances, and that while voters could still amend the state Constitution in the future to allow a new tax on assets or a retroactive tax, legal challenges are possible and there is no absolute certainty on how courts would rule.^{S2S3S12S13S20}

How it could affect your household

Tradeoffs

• Protection from new asset taxes against the ability to raise revenue from wealth: supporters say the measure closes a loophole that allows the Legislature to tax the value of retirement funds and savings accounts even though residents already paid income tax on that money, and that it protects all forms of personal property from new state taxes. The California Budget and Policy Center states that the measure would prevent state leaders from creating wealth based taxes in the future, that about two-thirds of Californians in the top 25 percent of the wealth distribution hold stocks, bonds or mutual funds compared with 9 percent of those in the bottom 25 percent according to a Public Policy Institute of California analysis, that current federal and state tax policies allow some large wealth increases to never be taxed because California taxes income when assets are sold but not the growth in value of assets held, and that stepped-up basis is estimated to cost California around $5 billion each year. SPUR states that the measure would block efforts to create new progressive tax policies to fund health care, food assistance and other programs.^S5S17S20
• Certainty for taxpayers against the state's ability to respond quickly: supporters say the state should not be able to pass new taxes that apply retroactively to money taxpayers earned in the past, that people deserve stable rules that do not change after years of saving and planning, and that the measure requires any new taxes to apply only after voters have approved them. SPUR's voter guide lists banning retroactive taxes as a point in favor because it would create more predictability for taxpayers. The California Budget and Policy Center states that many federal and state tax law changes have modest retroactivity periods, such as looking back to the beginning of a tax year, which reduces taxpayers' ability to avoid or evade a tax before it takes effect and can raise revenue more immediately when there are urgent needs, and that broadly prohibiting retroactive taxation would limit the state's ability to enact effective and timely tax policy changes. The measure includes an exception for a legislatively enacted tax that reaches back no more than 365 days during a governor declared emergency or fiscal emergency.^S5S7S17S20
• A competing measure can be nullified by a higher vote count: Article VIII, Section 5 provides that another initiative on the same ballot is in conflict with this measure if it would tax the ownership or control of retirement holdings, individually owned assets or other forms of personal savings, or would enact a retroactive tax, and that if this measure receives a greater number of affirmative votes its provisions prevail in their entirety and all provisions of the other measure are null and void. The Legislative Analyst states that if Proposition 42 receives more yes votes than Proposition 40, Proposition 40 could be stopped from becoming law even if it gets yes votes from a majority of voters, because the courts could find that Proposition 42 conflicts with Proposition 40. CalMatters reports that if both the wealth tax and either countermeasure are approved, the one with the higher vote tally becomes law, which is why the wealth tax could go down in defeat even if a majority of voters support it. The California Budget and Policy Center states that if both measures pass and Proposition 42 received more votes, Proposition 40 would likely be invalidated, and that Proposition 40 would exclude retirement accounts. The measure also provides that if it is superseded by a conflicting measure that is later held invalid, it is self-executing and given full force and effect.^S3S7S11S20
• What is protected and what is not: the definition in the text covers pensions, retirement accounts including 401(k), 403(b) and other individual retirement accounts, mutual funds, and all personal property whether tangible or intangible, including financial assets, investment accounts, business interests, digital assets, intellectual property, personal belongings and other assets used to produce or collect income or savings for retirement or financial planning. The prohibition applies to state taxes on ownership or control, and the text states that nothing in it alters the taxation of real property. The California Budget and Policy Center reads the same list as covering bank accounts, stocks, bonds, mutual funds, retirement accounts, interests in businesses, intellectual property, vehicles, jewelry and artwork. The League of Women Voters of California states that the ban goes far beyond retirement savings and would prohibit new state taxes on a wide range of personal property. The measure does not change taxes in effect, imposed and first collected on or before December 31, 2025, so existing county property taxes on business equipment and the state vehicle license fee continue.^{S2S7S13S14S20}
• Money on both sides, reported by sources that measure different things: the Secretary of State's compiled totals through 10/06/2026 report $110,827,037 in contributions to the one committee formed to support the measure and $703,494 to the one committee formed to oppose it. The Fair Political Practices Commission's list, last modified October 14, 2026, reports $112,822,537.26 in top aggregated contributions in support of Proposition 42 and, for a differently identified opposing committee, $32,346,200.51, with the opposing contributors marked to show that their money also covered other measures. Ballotpedia reports $94,762,553.58 in total support contributions and $340,225 in total opposition contributions through September 19, 2026. The largest reported funder on the support side is Building a Better California, listed at $112,800,000 on the Commission's list and shown on Ballotpedia's donor table with Sergey Brin at $102,000,000, L. John Doerr, III at $30,000,000, Patrick Collison at $22,000,000, Eric Schmidt at $15,141,313.01 and Vinod Khosla at $12,561,504. On the opposition side the largest reported funders are Service Employees International Union United Healthcare Workers West at $22,048,461.16 and Alan Davis at $250,000.^S8S9S14S18
• Polling, reported as polling: Ballotpedia's table of 2026 polls on the measure records a Public Policy Institute of California poll of 1,103 likely voters conducted September 4 to 10, 2026 with support at 54 percent, opposition at 43 percent and 4 percent undecided, with a margin of error of plus or minus 3.8 percent, and a UC Berkeley Institute of Governmental Studies poll of 2,310 likely voters sponsored by the Los Angeles Times conducted August 3 to 9, 2026 with support at 40 percent, opposition at 37 percent and 23 percent undecided, with a margin of error of plus or minus 2.5 percent. CalMatters displays a survey result of 54 percent support for Proposition 42 in its chart of the five tax measures. These are reported poll results, not predictions of the outcome, and the two polls differ substantially.^S11S14
• What the vote decides and what it leaves open: the measure fixes the prohibition on new state taxes on the ownership or control of retirement holdings, individually owned assets and other forms of personal savings, the prohibition on new retroactive state taxes and its emergency exception, the December 31, 2025 carve-out for existing taxes, the preservation of real property taxation, the rule that the article applies to statewide initiative measures submitted on or after January 1, 2026 including same ballot measures, the conflicting measures rule, severability, the effective date, the liberal construction clause and the legal defense provision. It leaves to the Legislature the enacting statutes and any emergency declaration, to the Governor the declaration of an emergency or fiscal emergency that would allow a limited retroactive tax, and to the courts any dispute about whether Proposition 42 conflicts with Proposition 40 or with any other measure on the ballot. The Legislative Analyst states that the fiscal effect is unclear as to when and by how much future revenues would be reduced, and the California Budget and Policy Center states that future statewide tax measures could still amend the Constitution to allow a tax on assets or a retroactive tax, though legal challenges are possible and there is no absolute certainty on how courts would rule.^S3S7S20

Sources

1. Proposition 42 Official Title and Summary (Official Voter Information Guide, November 3, 2026) California Secretary of State Accessed 2026-10-17
2. Proposition 42 Analysis by the Legislative Analyst (Official Voter Information Guide, November 3, 2026) California Secretary of State and Legislative Analyst's Office Accessed 2026-10-17
3. Proposition 42 [Ballot], Propositions on the November 3, 2026 Ballot Legislative Analyst's Office Accessed 2026-10-17
4. Proposition 42 summary page (Official Voter Information Guide, November 3, 2026) California Secretary of State Accessed 2026-10-17
5. Proposition 42 Arguments and Rebuttals (Official Voter Information Guide, November 3, 2026) California Secretary of State Accessed 2026-10-17
6. Proposition 42 print version, Official Voter Information Guide (title and summary, analysis by the Legislative Analyst, argument in favor, rebuttal, argument against, rebuttal) California Secretary of State Accessed 2026-10-17
7. Proposition 42 Text of Proposed Laws, Official Voter Information Guide (Article VIII added to the California Constitution and the Retirement and Personal Savings Protection Act of 2026) California Secretary of State Accessed 2026-10-17
8. Proposition 42 – Prohibits New State Personal Property Taxes and Certain Retroactive State Taxes. Initiative Constitutional Amendment., 2026 Ballot Measure Contribution Totals California Secretary of State (Cal-Access) Accessed 2026-10-17
9. Top 10 Contributors List, November 2026 General Election (last modified October 14, 2026) California Fair Political Practices Commission Accessed 2026-10-17
10. CA voter guide to Proposition 42: Property taxes, CalMatters California Voter Guide 2026 CalMatters Accessed 2026-10-17
11. 5 tax measures are on the California ballot. Here's how to make sense of them all (published October 5, 2026) CalMatters Accessed 2026-10-17
12. Proposition 42: Personal Property and State Taxes, California Ballot Proposition Guides, November 3, 2026 General Election Institute of Governmental Studies, University of California, Berkeley Accessed 2026-10-17
13. Prop 42 (2026), Limits New State Taxes on Personal Property, CaVotes ballot measure guide League of Women Voters of California Education Fund Accessed 2026-10-17
14. California Proposition 42, Prohibit New Taxes on Retirement Holdings, Personal Assets, and Savings and Limit Retroactive Taxes Initiative (2026) Ballotpedia Accessed 2026-10-17
15. Quick Reference Guide – Proposition 42 (Official Voter Information Guide, November 3, 2026) California Secretary of State Accessed 2026-10-17
16. Yes on Prop 42, campaign website of the committee supporting the measure (updated October 13, 2026) Yes on 42 – Protect Retirement & Life Savings, a coalition of retirees, blue-collar workers, seniors, veterans, small businesses & taxpayers Accessed 2026-10-17
17. CA Prop 42 – Personal Property Taxes, SPUR Voter Guide 2026 SPUR Accessed 2026-10-17
18. 2026 California Voter Guide: Proposition 42 KQED Accessed 2026-10-17
19. 2026 General Election explainer: Proposition 42, Ban new taxes on personal property (CalMatters staff, published October 1, 2026) KPBS Accessed 2026-10-17
20. What Would Proposition 42 Mean for California? Understanding the Prohibition on Taxing Certain Assets and Enacting Retroactive Taxes (Kayla Kitson, September 2026) California Budget and Policy Center Accessed 2026-10-17