Proposition 42 Claims to Shield Your 401(k). Who Really Benefits? | Opinion

The supporters of Proposition 42 want Californians to think it is needed to stop state lawmakers from reaching into the retirement savings of ordinary residents.

But the measure’s main backers are billionaires who want to avoid higher taxes and block Proposition 40, the disputed ballot measure that would create a one-time wealth tax on California’s richest residents.

Prop. 42 is one of two ballot measures that could interfere with Prop. 40. The other is Proposition 41. Under the California Constitution, when two measures approved in the same election conflict, the one with more yes votes prevails. That means if either Prop. 42 or Prop. 41 gets more support than Prop. 40, the proposed 5% wealth tax on Californians with more than $1 billion in assets would not go into effect.

On its face, Prop. 42 is sold as a protection for personal property and 401(k) accounts. If adopted, it would prevent new state taxes on those assets, but its practical effect would be to shield billionaires from the tax proposed by Prop. 40.

The idea that any governor would try to seize the retirement savings or property of middle-class Californians is far-fetched; a politician who did that would quickly be out of office. Even the state Legislature, often willing to spend freely, knows better than to target 401(k)s.

Prop. 42 addresses a problem that does not appear to exist. It would bar new state taxes on personal property, including retirement accounts, savings, investments and business interests, and it would also limit certain retroactive taxes. Those restrictions would be written into the California Constitution, leaving voters as the only way to change them.

Even without Prop. 40 on the ballot, Prop. 42 would create the impression that California had permanently settled tax policy for financial assets and other personal property. In reality, it would narrow the state’s future choices for taxing those assets, although a later constitutional amendment or another voter-approved measure could still change that policy.

Opponents say retirement accounts such as 401(k)s cannot legally be taxed. That appears to remain an unsettled legal question because no government has been reckless enough to try. Saying a constitutional amendment is needed to protect the savings of everyday Californians goes far beyond what is reasonable.

Prop. 40 asks voters a direct question: Should California impose a one-time wealth tax on about 200 residents whose net worth exceeds $1 billion? Prop. 42 is meant to weaken that choice and should be seen for what it is — a measure financed by billionaires to protect their own interests.

Prop. 42 is a poison pill aimed at derailing the real debate over a one-time wealth tax on billionaires. Voters should reject the distraction and vote no.

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