California Gov. Gavin Newsom (D) failed to reach an agreement to keep a proposed billionaire wealth tax off the November ballot, setting up what is expected to become one of the state’s most closely watched and expensive ballot measure campaigns.
Negotiations between Newsom’s office and supporters of the initiative ended without a compromise, allowing the proposal to proceed to voters this fall.
The ballot measure would impose a one-time 5% tax on California residents with a net worth exceeding $1 billion. Supporters say the revenue would help offset anticipated reductions in federal health care funding and preserve state programs, including Medi-Cal, hospitals, education and food assistance.
Newsom has opposed the proposal throughout the process, arguing that a California-only wealth tax would be difficult to administer, vulnerable to legal challenges and could encourage wealthy residents and businesses to relocate outside the state.
Dave Regan, president of SEIU-United Healthcare Workers West, said negotiations with the governor’s office consisted of only limited discussions.
“What the governor has made clear from the beginning is that he would not entertain any proposal or compromise that would tax billionaires,” Regan said during a virtual news conference.
According to Regan, supporters later offered to reduce the proposed tax rate from 5% to 2%, but Newsom declined the revised proposal.
The governor’s office declined detailed comment but indicated Newsom plans to address the issue publicly.
Supporters argue the measure is necessary to protect health care programs facing financial pressure following anticipated reductions in federal funding.
Regan said millions of Californians could lose health insurance if additional state revenue is not secured.
“Three and a half million people are going to lose health insurance,” Regan said. “People are going to suffer and die unnecessarily.”
California is home to more than 200 billionaires whose combined wealth is estimated to exceed $2 trillion. Advocates contend taxing a small portion of that wealth would preserve essential public services without affecting the vast majority of residents.
Opponents, including Newsom, the California Chamber of Commerce and several business organizations, argue the proposal would accelerate the departure of wealthy taxpayers, investors and companies that already have relocated operations outside California.
Earlier this month, the California Chamber of Commerce called the proposal “misguided” and warned it could create long-term economic consequences for the state.
Rep. Ro Khanna (D-CA) dismissed those concerns during the labor union’s news conference.
“The only reason we’re having this conversation is because people are concerned about the billionaire donor class,” Khanna said.
The prospect of the wealth tax has already prompted significant political spending, per the New York Post.
Google co-founder Sergey Brin and other wealthy Californians have backed competing ballot measures through a committee known as Building A Better California. Those proposals include additional auditing requirements for programs funded by new state taxes and could complicate implementation of the wealth tax if both measures are approved.
Critics of the proposal argue the measure could discourage investment and reduce state tax revenue over time if wealthy residents relocate.
Supporters counter that only a small number of Californians would be affected while the additional revenue would help preserve health care access for millions of residents.
The campaign is expected to become one of California’s most expensive ballot fights, with labor unions, business organizations, wealthy donors and political committees preparing to spend millions of dollars ahead of the November election.
Newsom has remained confident the proposal will ultimately fail.
“This will be defeated — there’s no question in my mind,” the governor said earlier this year. “I’ll do what I have to do to protect the state.”
