While the idea of a one-time tax on people over 200 has a long way to go before it gets on the ballot and will need to be passed by voters in November, the storm around it reflects a sense of anger and rage at the core of California. Silicon Valley is spawning new millionaires while millions of the state’s residents struggle with the loss of health care coverage and inflation.
Supporters of the proposed billionaires tax say it is one of the few ways the state can provide health care to its most vulnerable. Opponents warn it would destroy the innovation that has made the state prosperous and lead to an exodus of wealthy entrepreneurs from the state.
The controversial measure is causing a rift among already powerful Democrats who wield tremendous influence in California. Progressive icon Senator Bernie Sanders (I-VT) immediately supported the billionaires tax, while Governor Gavin Newsom condemned it.
Wealthy residents of the Golden State say they’re tired of feeling targeted. He says his success has created not only unimaginable wealth but also jobs and better lives for Californians, yet he feels he is being punished.
“California politics forces some of America’s richest regions to unite with some of the poorest, often separated only by a freeway,” said Thad Kooser, a political science professor at UC San Diego. “The impulse to force the highly wealthy to share their wealth is natural, but it is often rooted in our anti-tax traditions as well as the reality of modern concerns about suppressing entrepreneurship or moving job creation out of the state.”
The state budget in California is already largely dependent on income taxes paid by its highest earners. Because of that, revenues are likely to be volatile, dependent on capital gains from investments, bonuses to executives, and windfall profits from new stock offerings, and are extremely difficult for the state to predict.
If a majority of voters support it on the November ballot, the tax proposal would cost the state’s wealthiest residents about $100 billion.
Supporters say the revenue is needed to offset massive federal funding cuts to health care that President Trump signed this summer. The California Budget and Policy Center estimates that 3.4 million Californians could lose Medi-Cal coverage, rural hospitals could close and other health services would be reduced unless a new funding source is found.
On social media, some wealthy Californians opposing the wealth tax faced off with Democratic politicians and labor unions.
An increasing number of companies and investors have decided that staying in the state is not worth the hassle and are moving their companies and their homes to other states with lower taxes and less regulation.
“I promise you this will be the last straw,” Jesse Powell, co-founder of Bay Area-based crypto exchange platform Kraken, wrote on Twitter. “Billionaires will take all their spending, hobbies, philanthropy and jobs with them.”
Supporters of the proposed tax were given permission by California Secretary of State Shirley Weber to begin collecting signatures on December 26.
The proposal would impose a lump sum tax of up to 5% on taxpayers and trusts with assets such as business, art and intellectual property worth more than $1 billion. There are some exclusions, including property.
They could pay the levy in five years. Ninety percent of the revenue would finance health care programs and the remaining 10% would be spent on food aid and education programs.
To qualify for the November ballot, supporters of the proposal, led by the Service Employees International Union-United Healthcare Workers West, must collect signatures from approximately 875,000 registered voters and submit them to county elections officials by June 24.
The union, which represents more than 120,000 health workers, patients and health care consumers, has committed to spending $14 million on the measure so far and plans to start collecting signatures soon, said Suzanne Jimenez, chief of staff for the labor group.
Without new funding, he said, the state faces “the collapse of our health care system in California.”
(Celal Gans/Anadolu via Getty Images)
Representative Ro Khanna (D-Fremont) spoke in support of the tax.
“It’s a matter of values,” he said on X. “We believe billionaires can afford to pay modest property taxes, so working-class Californians have Medicaid.”
The Trump administration did not respond to requests for comment.
The debate has become a lightning rod for national think tanks looking to take aim at California policies or the super-rich.
On Tuesday, Sanders endorsed the billionaire tax proposal and said he planned to call a nationwide version.
“This is a model that should be emulated across the country, which is why I will soon implement a national wealth tax on billionaires,” Sanders said on Twitter.
But this proposal does not have unanimous support among Democrats.
In particular, Newsom has consistently opposed state-based property taxes. He reiterated his opposition when asked about the proposed billionaires tax in early December.
“You can’t isolate yourself from 49 other people,” Newsom said at the New York Times DealBook Summit. “We’re in a competitive environment. People have this simple luxury, especially people in that position, they already have two or three homes out of state. It’s a simple issue. You have to be practical about it.”
Newsom has opposed state-based property taxes throughout his tenure.
In 2022, he opposed a ballot measure that would have subsidized the electric vehicle market by increasing taxes on Californians making more than $2 million annually. The measure failed at the ballot box, with strategists on both sides of the issue saying Newsom’s vocal opposition to the effort was a key factor.
The following year, he opposed legislation by a fellow Democrat to tax taxpayers with wealth over $50 million at a 1% annual rate and taxpayers with wealth over $1 billion at a 1.5% annual rate. The bill was postponed even before it could be voted on in the legislature.
The latest effort is also being opposed by a political action committee called “Stop the Squeeze,” which was funded by a $100,000 donation from venture capitalist and longtime Newsom ally Ron Conway. Conservative taxpayer rights groups such as the Howard Jarvis Taxpayers Association. And state Republicans are expected to campaign against the proposal.
The chances of passage of the ballot measure in November are uncertain, given the possibility of heavy spending on the campaign – unlike statewide and other candidate races, there is no limit on the amount of money donors can contribute in support of or against the ballot measure.
“Supporters of this proposed initiative to tax California’s billionaires will have their work cut out for them,” said Kousser at UC San Diego. “Despite the state’s national reputation as ‘Scandinavia by the sea,’ there remains a strong anti-tax impulse among voters, who often disapprove of tax increases and are unwilling to kill the state’s golden goose of tech entrepreneurship.”
Additionally, as Newsom eyes a presidential bid in 2028, political experts question how the governor will position himself — opposed to raising taxes, but also not wanting to be seen as responsible for massive health care cuts that would harm the most vulnerable Californians.
“It wouldn’t be surprising if they qualified the initiative. There’s enough money and enough anger on the left to get it on the ballot,” said Dan Schnurr, a political communications professor who teaches at USC, Pepperdine and UC Berkeley.
“What happens once it’s qualified 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 places like the Midwest, who are focused on economic inequality, inflation, affordability and the growing wealth gap.
“I think it would be really hard for them to take the stance that we shouldn’t tax billionaires,” said Gonzalez, whose labor group will consider whether to support the proposed tax next year.
Peter Thiel speaks at the Cambridge Union in 2024.
(Nordin Catic/Getty Images for Cambridge Union)
California billionaires who are residents of the state as of Jan. 1 would be affected by the ballot measure if it passes. Major business leaders announced steps that appear to be a strategy to avoid the levy at the end of 2025. On December 31, PayPal co-founder Peter Thiel announced that his company had opened a new office in Miami, the same day venture capitalist David Sachs said he was opening an office in Austin.
Brian Gale, a taxation expert and law professor at UC Berkeley, said wealth taxes are not unprecedented in the U.S. and versions of them exist in Switzerland and Spain.
In California, he said, the tax provides an efficient and practical way to pay for health services without disrupting the economy.
“A 1% annual tax on billionaires for five years would essentially have no meaningful impact on their economic behavior,” Gale said. “We are financing to avoid a real economic disaster that has very little impact.”
Chamath Palihapitiya, a Palo Alto-based venture capitalist, disagrees. Palihapitiya writes on X that billionaires whose wealth is often locked up in company shares and is not liquid may go bankrupt.
This tax, he posted, would “kill entrepreneurship in California.”
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