A fierce debate over a proposed ballot measure to tax California's billionaires has sparked soul-searching across the state.
While the idea of a one-time tax on more than 200 people has a long way to go before it reaches the ballot and is expected to be passed by voters in November, the storm surrounding it reflects the zeitgeist of anxiety and anger in central California. Silicon Valley is minting new millionaires while millions of state residents face the loss of health insurance and struggle with inflation.
Supporters of the proposed tax on billionaires say it is one of the few ways the government can provide health care to the most vulnerable. Opponents warn it will stifle the innovation that has made the state rich and lead to an exodus of wealthy entrepreneurs from the state.
Controversial measure is already causing a rift among powerful Democrats who wield enormous influence in California. Progressive icon Sen. Bernie Sanders (I-Vt.) quickly supported a tax on billionaires, while Gov. Gavin Newsom condemned it.
Wealthy residents of the Golden State say they're tired of feeling like victims. They say their success has not only created unimaginable wealth, but also jobs and a better life for Californians, but they feel they are being punished.
“California politics brings together some of the wealthiest regions in America with some of the poorest, often separated by just a freeway,” said Thad Kousser, a political science professor at the University of California, San Diego. “The desire to force those with enormous wealth to share their wealth is natural, but it often clashes with the reality of our anti-tax traditions, as well as modern concerns about stifling entrepreneurship or stopping job creation outside the state.”
California's state budget already relies heavily on income taxes paid by its wealthiest people. This makes returns subject to volatility, dependent on capital gains from investments, executive bonuses and windfalls from new stock offerings, and extremely difficult for governments to predict.
The tax proposal would cost the state's wealthiest residents an estimated $100 billion if a majority of voters approve it in the November election.
Supporters say the revenue is needed to offset the massive cuts in federal health care funding that President Trump signed into law this summer. The California Budget and Policy Center estimates that up to 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 railed against Democratic politicians and labor unions.
A growing number of companies and investors are deciding that staying in the state isn't worth the hassle and are moving their companies and homes to other states with lower taxes and less regulation.
“I promise you this will be the last straw,” Jessie Powell, co-founder of Bay Area-based cryptocurrency exchange platform Kraken, wrote on X. “Billionaires will take all their spending, hobbies, philanthropy and jobs with them.”
Supporters of the proposed tax received permission to begin collecting signatures Dec. 26 from 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, artwork and intellectual property worth more than $1 billion. There are some exceptions, including property ones.
They could pay the tax for five years. Ninety percent of the proceeds will fund health programs, and the remaining 10% will be spent on food assistance and education programs.
To qualify for the November ballot, supporters of the proposal, led by the Service Employees International Union and the United Western Health Workers, must collect signatures from nearly 875,000 registered voters and submit them to county election officials by June 24.
The union, which represents more than 120,000 health care workers, patients and health care consumers, has so far committed to spending $14 million on the measure and plans to begin collecting signatures soon, said Suzanne Jimenez, the union's chief of staff.
Without new funding, the state faces “the collapse of our health care system here in California,” she said.
Rep. Ro Khanna (D-Fremont) voiced support for the tax.
“It’s a matter of values,” he said. said in X. “We believe billionaires can pay a modest wealth tax to ensure California's working class has Medicaid.”
The Trump administration did not respond to requests for comment.
The debate has become a lightning rod for national thinkers looking to take aim at California politics or the super-rich.
On Tuesday, Sanders backed the billionaire's tax proposal and said he plans to push for a national version.
“This is a model that should be emulated across the country, which is why I will soon introduce a national wealth tax on billionaires,” Sanders said on X. “We can and should respect innovation, entrepreneurship and risk-taking, but we cannot respect the extraordinary level of greed, arrogance and irresponsibility that much of the billionaire class currently exhibits.”
However, this proposal did not find unanimous support among Democrats.
Notably, Newsom has consistently opposed government wealth taxes. He reiterated his opposition when asked about a proposed tax on billionaires in early December.
“You can't isolate yourself from 49 other companies,” Newsom said at the New York Times' DealBook Summit. “We're in a competitive environment. People have this simple luxury, especially people of this status, they already have two or three houses out of state. It's a simple question. You have to be pragmatic about it.”
Newsom has opposed state wealth taxes throughout his tenure.
In 2022, he opposed a ballot measure that would have subsidized the electric vehicle market by raising taxes on Californians who earn more than $2 million a year. The measure failed at the ballot box, with strategists on both sides of the issue saying Newsom's outspoken opposition to the effort was the deciding factor.
The following year, he opposed legislation from fellow Democrats that would have taxed assets over $50 million at 1% a year and taxpayers with a net worth over $1 billion at 1.5% a year. The bill was delayed before the Legislature could vote on it.
Also opposing the latest effort is a political action committee called Stop the Contraction, which was created with a $100,000 donation from venture capitalist and longtime Newsom ally Ron Conway. Conservative taxpayer advocacy groups such as the Howard Jarvis Taxpayers Association. State Republicans are expected to campaign against the proposal.
The chances of passage of the ballot measure in November are uncertain given the potentially huge campaign costs – unlike statewide races and other candidates, there are no limits on the amount of money donors can contribute in support of or against ballot measures.
“Supporters of the proposed initiative to tax California billionaires will have their work cut out for them,” said Kousser of the University of California, San Diego. “Despite the state's national reputation as 'Scandinavia by the Sea,' there remains a strong anti-tax impulse among voters, who often reject tax increases and are reluctant to kill the state's golden goose of tech entrepreneurship.”
Additionally, as Newsom considers a presidential run in 2028, political experts are wondering how the governor will position himself — opposing tax increases but also not wanting to be seen as responsible for large-scale health care cuts that will harm the most vulnerable Californians.
“It wouldn't be surprising if they approved this initiative. The left has enough money and enough pent-up anger to put this on the ballot,” said Dan Schnur, a political communications professor who teaches at the University of Southern California, Pepperdine and the University of California, Berkeley.
“What happens when he qualifies 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 irritate primary voters in places like the Midwest, who are 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 we shouldn’t tax billionaires,” said Gonzalez, whose labor group will consider whether to approve the proposed tax next year.
California billionaires who reside in the state as of Jan. 1 would be affected by the ballot measure if it passes. Prominent business leaders announced moves that appeared to be a strategy to avoid the late 2025 levy. On December 31, PayPal co-founder Peter Thiel announced his firm had opened a new office in Miami, the same day venture capitalist David Sachs announced he was opening an office in Austin.
Wealth taxes are not unprecedented in the U.S., and versions of them exist in Switzerland and Spain, says Brian Galle, a tax expert and law professor at the University of California, Berkeley.
In California, he said, the tax offers an efficient and practical way to pay for health care without hurting the economy.
“An annual tax of 1% on billionaires for five years would essentially have no significant impact on their economic behavior,” Galle said. “We are funding a way to avoid real economic disaster with something that has very little impact.”
Palo Alto venture capitalist Chamath Palihapitiya disagrees. Billionaires, whose wealth is often locked up in company shares and is not liquid, may go bankrupt – Palihapitiya wrote on X.
The tax, he said, would “kill business in California.”
