Overview of California Democrats Can’t Agree On How To Tax Billionaires
This Wall Street Journal episode examines California’s proposed billionaire wealth tax, Proposition 40, and why it has become a major political fight not just between Democrats and billionaires, but inside the Democratic coalition itself. The measure was pitched as a one-time emergency tax to help offset looming Medicaid cuts, but it has sparked pushback from Governor Gavin Newsom, parts of organized labor, some health care groups, and even prominent progressive figures like Katie Porter. Meanwhile, billionaires and their allies are spending heavily to defeat it—and to pass countermeasures that could nullify it.
Why the Tax Proposal Emerged
The idea began as a response to expected federal Medicaid cuts tied to Trump-era legislation.
- California depends heavily on Medicaid; more than one-third of residents rely on it.
- A major health care union, SEIU-UHW, looked for ways to fill the funding gap.
- After polling options, the union settled on a one-time tax on billionaire wealth as the most politically viable solution.
What Proposition 40 Would Do
- Impose a one-time 5% tax on the global assets of California billionaires.
- Apply retroactively to billionaires living in California at the start of 2026.
- Affect roughly 200–300 people.
- Raise an estimated $100 billion.
The tax targets not salaries, but billionaire assets like stocks, bonds, private-company holdings, intellectual property, and art.
Why the Measure Split Democrats
The episode emphasizes that this is unusual because opposition is coming from inside the Democratic ecosystem.
Governor Newsom’s Objections
Governor Gavin Newsom opposed the measure, arguing:
- He has historically not supported state-level wealth taxes.
- A California-only tax could drive wealthy residents out of the state.
- Losing billionaire taxpayers could hurt state revenue and public services.
The transcript suggests critics believe Newsom’s stance may also reflect political calculations as he eyes a possible 2028 presidential run and wants to maintain ties with wealthy donors.
Labor’s Unusual Division
Organized labor, normally aligned on progressive tax issues, is split:
- SEIU-UHW supports the tax because it wants to protect health care funding.
- Some teachers unions are divided.
- Skilled trades unions oppose it, worrying that reduced state revenue would hurt infrastructure projects and jobs.
- Some unions also object to the fact that 90% of the revenue is earmarked for health care, rather than the broader state budget.
Concerns From Health Care and Progressive Critics
Even some supporters of taxing billionaires argue the proposal is flawed:
- Medical and trade groups worry the money may not actually guarantee more health care spending.
- Critics say the measure is too narrow and could create a future budget cliff if the revenue disappears after the one-time tax.
- Katie Porter argued that if California is going to tax billionaires, it should do so in a way that funds broader priorities like child care and free college—not just prop up what she called a broken health care system.
The Billionaire Backlash
Billionaires responded quickly and aggressively.
- Sergey Brin helped seed opposition efforts.
- Other tech wealth holders, including founders, CEOs, and venture capitalists, contributed large checks.
- The anti-tax campaign is blanketing California with ads, mailers, texts, and social media outreach.
- Reports described tens of millions of dollars in spending against the measure.
The Strategy
Opponents argue the tax is dangerous not just because it targets billionaires, but because it could set a precedent.
They warn that:
- It could scare away innovation and company formation in California.
- Future founders may choose to build elsewhere.
- California’s reputation as a place for startups and tech growth could suffer.
The Countermeasures on the Ballot
The opposition has backed competing ballot measures that could undermine Prop 40 even if it passes:
Proposition 41
Would require that new taxes follow existing rules for how funds can be used, preventing the money from being directed to Medicaid in the way supporters want.
Proposition 42
Would ban new wealth taxes altogether, under the branding of protecting retirement and personal savings.
The result is a highly confusing ballot scenario in which voters could potentially approve the wealth tax and also approve measures that effectively block it.
Polling and Political Mood
Support for the tax has weakened over time:
- Earlier polling showed a slight majority in favor.
- A recent poll showed the measure underwater for the first time.
- Even so, it remains a major issue for engaged voters, especially among college graduates and higher-income households.
The episode highlights how the measure has become a test case for whether a wealth tax can survive even in a deeply blue state.
Main Takeaways
- Prop 40 is framed as an emergency fix, not a permanent tax overhaul.
- Democratic unity is fractured: Newsom, unions, and some progressives are on opposite sides.
- Billionaires are fighting back hard, spending heavily and pushing countermeasures.
- The measure may fail politically or get entangled legally, even if voters pass it.
- The episode suggests that wealth taxes are far harder to implement than they sound, especially when they threaten powerful interests and complicate state budgets.
Likely Aftermath
Laura Nelson notes that, whatever happens at the ballot box, she expects a legal fight afterward. The broader implication is that California’s battle over billionaire taxation could become a national example of how difficult it is to turn progressive tax ideas into law—even in a state with a strong Democratic majority.