California voters will consider a measure in November to raise taxes on billionaires

SACRAMENTO, Calif. (AP) — California voters will consider a controversial proposal in November to temporarily raise taxes on billionaires after the labor union backing the measure announced Thursday it would forge ahead despite pressure from critics to withdraw it.

The proposal, backed by the Service Employees International Union Healthcare Workers West, would impose a one-time 5% tax on individuals whose net worth exceeds $1 billion and who were living in the state as of Jan. 1, 2026. The goal is to generate $100 billion in revenue, mainly to fund the state’s Medicaid system after federal cuts.

“We aren’t backing down,” campaign spokeswoman Debru Carthan said on a Zoom call.

Democratic Gov. Gavin Newsom and many traditional allies of the union oppose the measure. They argue it is a temporary fix for an ongoing problem and that it would push the ultrawealthy to leave the state, taking the money they would contribute in income taxes with them. Newsom, who is considering a presidential run as he prepares to leave office in January, has generally opposed tax increases during his time as governor.

A coalition of healthcare, education and housing groups — including the California Medical Association and California School Boards Association — banded together last week to fight the tax.

“The dangerous wealth tax directly threatens vital funding for education and schools, healthcare and clinics, public safety, and infrastructure projects by making California’s revenue even more volatile,” the coalition said in a statement.

Brian Brokaw, a Newsom political adviser who is leading a political committee opposing the tax, said it would “make California’s biggest challenges worse.”

“Driving away the state’s sustainable tax base for a one-time grab is bad policy and an even worse deal for 40 million Californians who will be left holding the bag,” he said in a statement.

Under the proposal, the state would spend the money generated from the tax over multiple years. The nonpartisan Legislative Analyst’s Office estimates that the proposal would generate tens of billions of dollars in the first few years, but that income tax revenues would subsequently decline by hundreds of millions of dollars annually.

Many of the Silicon Valley tech moguls who oppose the measure have already moved their assets to other states or threatened to do so to avoid the possible tax. They have also spent millions to try to defeat it.

Since the proposal was announced in October, Google co-founder Sergey Brin has donated $82 million to a political committee called Building a Better California that backs a variety of initiatives designed to blunt the billionaire tax proposal. It has raised more than $118 million, counting Brin’s contributions, from fewer than a dozen donors.

California relies on its top 1% of earners for nearly half of its personal income tax revenue.

The union offered to scale back its proposal last week, asking Newsom to back a 2% tax on billionaires instead. But the governor’s office said the lower rate didn’t change his stance.

The proposed tax may have piqued the interest of many Democrats because it comes at a time when they are particularly concerned about affordability, income inequality and federal cutbacks to government programs, said Martin Gilens, a political science professor at the University of California, Los Angeles.

“There’s kind of a perfect storm that sort of bolsters preexisting inclinations to be sympathetic to the idea of raising taxes on the well-to-do,” he said.

But there’s a catch. Support for ballot initiatives often declines as the election nears, and if the measure passes, it’s likely to face legal challenges, Gilens said.