It hasn’t even qualified yet for the November ballot, but a proposal by one of California’s most powerful labor unions to tax billionaires to make up for federal funding cuts already has some of the state’s wealthiest residents girding for an expensive fight at the ballot box.
Revenues from the proposed one-time wealth tax, called the Billionaire Tax Act, would mainly fund health care in the nation’s most populous state, as well as education and food assistance programs.
California has more billionaires than any other state — approximately 200, if not more, according to backers of the ballot initiative. They say it’s only fair that the wealthiest who benefited from the Trump administration’s tax breaks and who made their fortunes with the help of California resources “contribute proportionately” toward supporting some of the state’s social safety nets.
But critics of the tax, which includes Gov. Gavin Newsom, worry the ballot initiative will drive away the state’s wealthiest, including entrepreneurs who might take their companies — along with income taxes and the jobs they provide — with them.
A poll conducted this month by The Mellman Group, a public opinion research firm, found that less than half of likely voters in California support the proposed tax. Service Employees International Union-United Healthcare Workers West, the labor group spearheading the ballot initiative, alleged the survey was flawed, however, and suggested its own internal polling shows that what it’s proposing resonates with the majority of voters.
More details about the poll are below. But first, we break down how the proposed tax would work, why it’s being floated and who supports and opposes the proposal.
What the tax would do
This proposal would levy a one-time tax of up to 5% on individuals and trusts with assets worth more than $1 billion.
It would apply to billionaires living in California as of Jan. 1 of this year, with payment due in 2027. Individuals could spread their payments over five years, though they’d have to pay a deferral charge of 7.5% on the remaining unpaid balance.
Proponents estimate the tax would generate a total of $100 billion for the state.
The plan stipulates that 90% of the revenues would pay for health care, with the remaining 10% funding education and food assistance programs.
Proponents of the tax say it would save the state’s health care system from collapsing as a result of federal funding cuts. They say the revenues from the one-time tax would keep hospital emergency rooms, clinics, nursing homes and other health care facilities open; keep health care workers employed; and stabilize health insurance coverage and premiums for Californians.
According to SEIU-UHW, nearly 15 million low-income Californians, including more than half the state’s children and 2.2 million seniors and individuals with disabilities, rely on Medi-Cal, which stands to lose over $19 billion annually in federal funding because of recent actions by the Trump administration and Congress.
The union said there is also a need to raise money for education and food-assistance programs because public schools and the federal Supplemental Nutrition Assistance Program are facing federal cuts as well.
Politicians, billionaires weigh in
Supporters of the tax are gathering signatures to put the proposal on the November ballot. They must collect nearly 875,000 valid signatures from registered voters by June 24.
And yet, even before the proposal has qualified for the ballot, several elected officials and prominent business leaders have staked their positions on the divisive issue.
Newsom has been vocal about his objection to the tax, citing concerns that it would push some of the state’s wealthiest residents, who contribute heavily to California’s tax base, to move elsewhere. There have already been reports of the ultra-wealthy relocating or moving their assets out of California.
During remarks at the World Economic Forum in Switzerland on Thursday, Jan. 22, Newsom reiterated his opposition to the proposed tax.
“(A) one-time wealth tax at a state level that almost exclusively goes to solve one problem — health care — and not solving for larger issues like education, supporting police officers and firefighters, and starves the rest of the general fund, that has had, already, the impact of people moving out of our state, and impacting then the annual income tax collection, is not something I support,” he said.
Instead, the governor backs the state’s progressive tax structure, where the more one earns, the higher their income tax rate is.
Newsom has also admitted to working behind the scenes to try to keep the proposed initiative off the ballot and said he’d work to defeat it should it come before voters.
According to the state’s nonpartisan Legislative Analyst’s Office, the proposed wealth tax would probably result in tens of billions of dollars in one-time revenue for the state over several years. However, it could potentially cost California hundreds of millions of dollars or more each year in general fund revenue if some of the state’s wealthiest residents move and stop paying income tax to the state. General fund dollars help pay for education, health care, prisons and other state services, the LAO reported.
“This would mean less money for the state’s general budget that supports education, health care, prisons, and other services. While there would be money from the wealth tax to pay for some of these things, like health care, that money would be temporary,” the LAO’s report last month predicted.
In December, Google co-founders Larry Page and Sergey Brin started moving some of their businesses to other states, and a trust with ties to Page reportedly purchased a home in Miami recently.
Venture capitalist Peter Thiel, meanwhile, has given $3 million to a committee working to defeat the ballot initiative, according to news reports.
Not everyone who would be subject to the billionaire tax opposes it, though.
Nvidia CEO Jensen Huang told Bloomberg that Silicon Valley is where the talent pool is, and that he chose to live there and would be “perfectly fine” with paying the proposed tax.
Earlier this month, Suzanne Jimenez, chief of staff at SEIU-UHW, told The New York Times that claims about an exodus of billionaires from the state were overstated.
“The overwhelming majority of billionaires have chosen to stay in California past the Jan. 1 deadline,” she said. “Only a very small percentage left before the deadline, despite weeks of ‘Chicken Little’ talking points claiming a modest tax would trigger a mass departure.”
Politicians who support the proposed tax include U.S. Sen. Bernie Sanders of Vermont, who called it “a model that should be emulated throughout the country,” and Silicon Valley Rep. Ro Khanna.
What one poll says
This week, Republican strategist Mike Murphy, in a call with reporters, shared results of a poll he had commissioned on behalf of several “high-net-worth individuals” in California. Murphy did not identify any of the individuals by name.
The poll of 800 voters, who represent the likely electorate in this year’s November election, was conducted Jan. 6-12 by The Mellman Group. The firm reported that 48% of respondents initially said they would support the tax, while 38% said they wouldn’t vote for it and 14% were undecided.
But after hearing messaging both for and against the tax, support for the ballot initiative dropped to 46% while opposition increased to 44%, the poll showed.
This suggests the “yes” side will have a “pretty tough” time getting the tax passed, Murphy said.
“There’s no love for billionaires,” Murphy said, “but there are severe doubts among voters about whether or not this measure will deliver what it promises, and what will it cost — what are the offsetting downsides to it?”
Proponents of the ballot initiative criticized the poll as “flawed” and “one-sided, claiming it failed to emphasize to survey respondents that hospitals and emergency rooms would be forced to close due to federal funding cuts.
“Despite billionaire surrogates pushing misleading polls and misinformation, what we haven’t heard from them yet is any proposal with a better way to prevent ER closures across the state, to prevent a million people in California getting kicked off health insurance, and to prevent millions more seeing massive health care premium increases this year and next,” Jimenez, the chief of staff for SEIU-UHW, said.
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