A new tax battle for California’s billionaires will heat up in the coming months as citizens argue over whether the state should squeeze its wealthiest people to better serve its ordinary citizens.
The proposed multimillion-dollar tax that created the storm is far from being approved by voters or even making it to the ballot, but the idea is already causing pushback from vocal tech executives — some of whom have already shifted their bases out of state.
Under the Billionaires Tax Act, Californians worth more than $1 billion will pay a one-time tax of 5% on their total wealth. The Service Employees International Union-United Healthcare Workers West, the union behind the action, said the move will raise much-needed funds for health care, education and food assistance programs.
Some unions are stacked against billionaires, targeting the wealthy in Los Angeles.
A group of labor unions in Los Angeles said Wednesday it is proposing a ballot measure to raise taxes on companies whose top executives earn 50 times more than median workers.
Here’s how this battle could play out in Golden State:
Who would be affected?
California’s billionaire tax will apply to about 200 California billionaires living in the state as of Jan. 1. About 90% of the funds will go to health care and the rest to K-14 public education and government food assistance.
The tax, due in 2027, would tax real estate, pensions and retirement accounts, according to an analysis from the Legislative Analyst’s Office, a nonpartisan government agency. Billionaires can spread the tax payments over five years, but they will have to pay more.
What billionaires are already moving away from California?
Google founders Larry Page and Sergey Brin
Google still operates in California, but a December filing with the California Secretary of State shows other companies tied to Page and Brin recently moved out of the state.
For one example, it shows that one of the companies they managed, now called T-Rex Holdings, moved from Palo Alto to Reno last month.
Business Insider and The New York Times previously reported on the books. Google did not respond to a request for comment.
Palantir founder Peter Thiel
Thiel Capital, based in Los Angeles, announced in December that it had opened an office in Miami. The company did not respond to a request for comment. Thiel recently donated $3 million to the political committee of the California Business Roundtable, which opposes the ballot measure, records provided by the Secretary of State’s Office show.
Oracle co-founder and Chief Technology Officer Larry Ellison
Years before the wealth tax proposal, Ellison began withdrawing from California, but has continued to distance himself from the government since the proposal came out.
Last year, Ellison sold his San Francisco mansion for $45 million. The home at 2850 Broadway was sold off-market in mid-December, according to Redfin.
Oracle declined to comment.
DoorDash Co-Founder and Chief Technology Officer Andy Fang
Fang, who was born and raised in California, told X that he loves the country but is considering moving.
“Stupid wealth tax proposals like this make me irresponsible for not planning to leave the state,” he said.
DoorDash did not respond to a request for comment.
What would it take to become law?
To qualify for the ballot, supporters of the proposal, led by a health care union, must collect the signatures of nearly 875,000 registered voters and submit them to county election officials by June 24.
If it comes to a vote in November, the proposal will be the focus of intense scrutiny and debate as both sides have already set up huge war chests to attack voters for their positions. A majority of voters will need to approve the ballot measure.
Billionaire lawyers have also signed that the war will not end even if the ballot measure passes.
“Our clients are prepared to file a vigorous constitutional challenge if this measure moves forward,” wrote Alex Spiro, an attorney representing billionaires like Elon Musk in a December letter to Gov. Gavin Newsom.
What are the possibilities of this program?
It’s unclear whether the ballot measure has a good chance of passing in November. Newsom opposes the tax, and his support has proven crucial in the polls.
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 estimate failed. The following year, he argued against the legislation for more than $50 million in tax assets. The bill was withdrawn before the Legislature could vote on it. A bill that would have imposed an annual tax on California residents with more than $30 million in income also failed in 2020.
However, Sen. Bernie Sanders (Vt.) and Rep. Ro Khanna (D-Fremont) supported the wealth tax proposal, and Californians have passed temporary tax measures before. In 2012, they approved Proposition 30 to increase the sales tax and personal income tax on residents with annual incomes over $250,000.
Can it solve California’s problems?
The Legislative Analyst’s Office said in a December letter that the state would likely collect tens of billions of dollars in wealth taxes, but it could also lose other tax revenue.
“The exact amount that the government will collect is very difficult to predict for many reasons. For example, it is difficult to know what steps businessmen are taking to reduce the amount of tax they pay. Also, a lot of wealth is based on stock prices, which are always changing,” the book said.
California economist Kevin Klowden said the tax could cause future budget problems for the state. “The bottom line is that this is a one-time fix to what is a systemic problem,” he said.
Proponents of the proposal say the move would raise nearly $100 billion and reverse speculation that billionaires would flee.
“We’re seeing a lot of cheap talk from billionaires,” said UC Berkeley law professor Brian Galle, who helped write the proposal. “Some people go and change their behavior, but a lot of rich people don’t, because it doesn’t make sense.”
Still, the pushback has been growing.
Palo Alto-based venture capitalist Chamath Palihapitiya estimates that the lost income from billionaires who have already left the state will result in more lost tax revenue than the new tax gains.
“By starting this ill-conceived excise tax effort, California’s budget deficit will worsen,” he wrote in X. “And we still don’t know if the tax will be voted on.”
The union that supports the plan says that “the story of the exit of billions” is “strongly strengthened.”
“At this point, it appears that the majority of billionaires have chosen to stay in California before the January 1 deadline,” said Suzanne Jimenez, SEIU-United Healthcare Workers West chief of staff. “There is a very small percentage left before the deadline, despite weeks of talk about Chicken Little saying that a modest tax would cause more people to leave.”
Times staff writer Seema Mehta contributed to this report.
