California could become the first state to tax billionaires' wealth

SACRAMENTO, Calif. (AP) — California could become the first state in the nation to tax the net worth of billionaires Tuesday under a ballot measure that has divided liberal leaders nationally and triggered one of the most expensive ballot fights in state history as the ultra-rich scramble to figure out whether they would pay the tax or flee.

Proposition 40 would impose a one-time 5% tax on the wealth of Californians whose net worth exceeds $1 billion, with most of the revenue dedicated to replacing federal funding cuts to healthcare.

Vermont Sen. Bernie Sanders has framed the proposal as a monumental step toward reining in deep wealth inequality by ensuring the ultra-rich pay their fair share. But Democratic Gov. Gavin Newsom warns it would prompt the state's wealthiest to move out of California and take their tax money with them.

The “no” side has raised roughly 10 times as much as the “yes” side, thanks in large part to tech moguls and venture capitalists, who have poured millions into a political action committee fighting the measure. Billionaires are already bracing for its approval. Some of them, including Google co-founders Sergey Brin and Larry Page, started cutting ties with the state after the measure was unveiled. Mark Zuckerberg said he would stay in California for eight years and made a deal with Meta that would help him pay the tax without losing his ownership stake in the company.

Backers of the proposed tax, led by the powerful labor union SEIU United Healthcare Workers West, say it's needed to help the state backfill the federal funding cuts. The union estimates the state will lose $100 billion in federal healthcare funding over five years.

“It's time to collect those taxes so we can ensure that our healthcare system is still safe,” said Lorena Gonzalez, president of the California Federation of Labor Unions.

But some traditional Democratic allies, including Planned Parenthood and the California Teachers Association, are part of a coalition opposing it. They're concerned about how the tax revenue would be divvied up and about the potential impact on the state's budget if there's a mass exodus of wealthy taxpayers. California's budget relies heavily on the income tax of the state's richest residents.

Californians are divided on the measure.

Likely voters were slightly more likely to oppose the measure than support it in a poll conducted in mid-October by the Public Policy Institute of California, with 52% saying they would vote “no” and 46% saying they would vote “yes.” That’s an apparent shift from a PPIC survey conducted in early September , when 52% of likely voters said they’d vote for the tax and 46% said they’d vote against it.

Robert Swonger, an auto glass technician living near Sacramento who's politically independent, said he planned to vote against it.

“Obviously, I would like billionaires not to have as much money as they do,” he said. “But I don't believe taxing them out of existence is going to work.”

Anthony Serrano, a Democrat living in Folsom who works for Kaiser Permanente, one of the nation's largest not-for-profit healthcare plans, said he was leaning toward voting for the tax because he tends to support “anything that is a positive for healthcare.”

Even if the measure wins approval from a majority of voters, it would be blocked from taking effect if at least one of two measures designed to nullify it, which are also on this year's ballot, passes and receives more “yes” votes. The proposals, which are backed by the political action committee Building a Better California, include a ban on new taxes on financial assets and other personal property, a category that excludes real estate. The committee has raised more than $333 million, about 30% of it from Brin.

Progressive politicians, including Sanders and Massachusetts Sen. Elizabeth Warren, have long supported a federal wealth tax. Newsom says a California wealth tax would disadvantage the state, but he supports a national minimum tax on anyone with a net worth above $100 million.

Days before Sanders held rallies in California cities last month urging voters to support the state measure, Newsom told reporters that the senator's focus on wealth inequality was “spot-on.” But he said that "on this issue, we fundamentally disagree."

Even if the proposed billionaire tax fails in California, the battle over the measure ignited a crucial dialogue on the issue, Gonzalez said.

“We are taking a step forward, and we are showing other states that you can look them in the eye — you can look these billionaires in the eye — and take them on,” she said.