A heated debate over a proposed ballot measure to tax California’s billionaires has sparked a nationwide investigation.
Although the idea of a one-time tax on people over 200 has a long way to go before it goes on the ballot and will need to be approved by voters in November, the storm surrounding it captures the zeitgeist of angst and anger at the core of California. Silicon Valley is producing new millionaires while millions of state residents face losing health care and fighting inflation.
Supporters of the proposed multimillion-dollar tax say it is one of the few ways the state can provide health care to the most vulnerable. Opponents warn that it will disrupt the innovation that has made the state rich and cause rich businessmen to leave the state.
The controversial move is already divisive among powerful Democrats who enjoy a large majority in California. The progressive icon Sen. Bernie Sanders (Vt.) quickly approved a tax on billionaires, while Gov. Gavin Newsom rejects it.
Wealthy residents of the Golden State say they are tired of feeling targeted. Their success has not only created unimaginable wealth but also jobs and better lives for Californians, they say, yet they feel they are being punished.
“California politics includes some of America’s wealthiest and poorest areas, often separated by freeways,” said Thad Kousser, a political science professor at UC San Diego. “The goal of forcing the super-wealthy to share their wealth is natural, but it often boils down to the reality of our anti-tax culture and modern concerns about stifling business or driving job creation out of government.”
The state budget in California already depends heavily on income taxes paid by high earners. As a result, income tends to fluctuate, depends on capital gains, bonuses to executives and wind-outs from new stock issuances, and is notoriously difficult for the government to predict.
The tax proposal would cost the state’s wealthiest citizens an estimated $100 billion if a majority of voters support it in the November election.
Supporters say the revenue is needed to reverse the massive federal health care funding cuts signed by President Trump this summer. The California Budget & Policy Center estimates that as many as 3.4 million Californians could lose Medi-Cal coverage, rural hospitals could close and other health care services could be cut unless a new source of funding is found.
On social media, some wealthy Californians who oppose the wealth tax have confronted Democratic politicians and labor unions.
An increasing number of companies and investors have decided that it is not worth it to be in the state and are taking their companies and their homes to other states with lower taxes and less regulations.
“I promise you this will be the last straw,” Jessie Powell, founder of Bay Area-based crypto exchange platform Kraken, wrote on X. “Billionaires will take with them all their money, hobbies, philanthropy and jobs.”
Supporters of the proposed tax were given permission to begin collecting signatures Dec. 26 by California Secretary of State Shirley Weber.
The proposal would impose a one-time tax of up to 5% on taxpayers and trusts with assets, such as businesses, art and intellectual property, valued at more than $1 billion. There are exclusions, including property.
They can pay the tax in five years. Ninety percent of the revenue will fund health care programs and the remaining 10% will be used for food aid and education programs.
To qualify for the November ballot, proponents of the proposal, led by the Service Employees International Union-United Healthcare Workers West, must collect the signatures of nearly 875,000 registered voters and submit them to county election officials by June 24.
The union, which represents more than 120,000 health workers, patients and health care consumers, has pledged to spend $14 million on the measure so far and plans to start collecting signatures soon, said Suzanne Jimenez, the group’s chief of staff.
Without new funding, the state is facing “a collapse of our health care system here in California,” she said.
Rep. Ro Khanna (D-Fremont) spoke in support of this tax.
“It’s a matter of values,” he told X. “We believe billionaires can pay a lower wealth tax so lower-income Californians can get Medicaid.”
The Trump administration did not respond to requests for comment.
The debate has become a lightning rod for national thought leaders who want to target California’s policies or the super-rich.
On Tuesday, Sanders endorsed a multibillion-dollar tax proposal and said he plans to call for a statewide version.
“This is an example that should be emulated across the country, which is why I will soon introduce a national wealth tax for billionaires,” Sanders told X. “We can and should respect innovation, entrepreneurship and risk-taking, but we cannot respect the extraordinary level of greed, arrogance and irresponsibility displayed by the majority class of billionaires.”
But there is no unanimous support for the proposal among Democrats.
Notably, Newsom has been opposed to state-based wealth taxes. He reiterated his opposition when asked about the proposed billionaire tax earlier in December.
“You can’t separate yourself from the other 49,” Newsom said at the New York Times DealBook Summit. “We’re in a competitive environment. People have this simple luxury, especially people in that situation, they already have two or three homes outside of the county. It’s a simple thing. You have to talk about it.”
Newsom has opposed state-based wealth taxes throughout his administration.
In 2022, he opposed a ballot measure that would have subsidized the electric car market by raising taxes on Californians earning more than $2 million a year. The measure failed at the ballot box, and strategists on both sides of the issue said Newsom’s opposition to the effort was a key factor.
The following year, he opposed a law made by one of the Democratic Alliance for tax assets that exceed $50 million at 1% per year and taxpayers with a value of more than $1 billion at 1.5% per year. The bill was suspended before the legislature could vote on it.
The latest effort is also opposed by a political action committee called “Stop the Squize,” which was armed with a $100,000 donation from venture capitalist and Newsom colleague Ron Conway. Conservative taxpayer advocacy groups such as the Howard Jarvis Taxpayers Assn. and state Republicans are expected to campaign against the proposal.
The chances of the ballot measure passing in November are uncertain, given the potential for large campaign spending — unlike statewide and other candidate races, there is no limit on the amount of money donors can give in support of or against the ballot measure.
“Supporters of this proposed plan to tax California’s billionaires will have their work cut out for them,” said Kousser at UC San Diego. “Despite the country’s reputation as ‘Scandinavia by the Sea,’ there is still strong anti-tax sentiment among voters who generally reject tax increases and don’t want to kill the country’s tech economy.”
Additionally, as Newsom considers a presidential bid in 2028, political experts are asking how the governor will position himself — opposing tax increases but also not wanting to be seen as responsible for major health care cuts that would hurt California’s most vulnerable populations.
“It wouldn’t be surprising if they fit the bill. There’s enough money and enough anger on the left to get out the vote,” said Dan Schnur, a political communication professor who teaches at USC, Pepperdine and UC Berkeley.
“What happens when it’s appropriate is anyone’s guess,” he said.
Lorena Gonzalez, president of the California Federation of Labor Unions, called Newsom’s position an “Achilles heel” that could upset primary voters in areas like the Midwest focused on economic inequality, inflation, affordability and the growing wealth gap.
“I think it will be very difficult for him to take the position that billionaires should not pay taxes,” said Gonzalez, whose party will consider whether to approve the proposed tax next year.
California billionaires who are state residents as of Jan. 1 they will be affected by the voting measure if it passes. Prominent business leaders have announced measures that appear to be a tax avoidance strategy by the end of 2025. On December 31, PayPal founder Peter Thiel announced that his company opened a new office in Miami, the same day financier David Sacks said he was opening an office in Austin.
Wealth taxes have never existed in the US and versions exist in Switzerland and Spain, said Brian Galle, a tax expert and law professor at UC Berkeley.
In California, the tax provides an efficient and effective way to pay for health services without disrupting the economy, he said.
“A 1% annual tax on billionaires for five years will not have a significant impact on their economic behavior,” said Galle. “We’re financing a way to avoid a real economic disaster with something that has very little impact.”
Palo Alto-based venture capitalist Chamath Palihapitiya disagrees. Billionaires whose fortunes tend to be locked up in corporate stocks and not liquid assets may run out of money, writes Palihapitiya in X.
The tax, he wrote, “will kill businesses in California.”
