California Billionaire Tax Faces Opposition From Governor, Union Concerns Mount
Sacramento, CA – – A proposed one-time 5% tax on California billionaires is running into significant headwinds, with Governor Gavin Newsom voicing strong opposition and concerns growing over potential economic fallout. The tax, spearheaded by the Service Employees International Union-United Healthcare Workers West (SEIU-UHW), aims to generate revenue but is facing criticism from both sides of the political spectrum.
Governor Newsom has publicly stated his concerns that the tax, slated for 2027, would ultimately harm the state’s long-term financial health. He argues that while California already has a progressive tax structure, this particular measure could lead to a reduction in funding for essential services like education, firefighting, and law enforcement. “California has the most progressive tax structure in the United States of America,” Newsom said at a Bloomberg News event in San Francisco. “That said, I fear the way this has been drafted… It will reduce investments in education. It will reduce investment in teachers and librarians, childcare. It will reduce investments in firefighting and police.”
The governor’s opposition stems from data provided by the Legislative Analysts Office, which suggests the tax would provide a short-term revenue boost followed by a decline as wealthy residents potentially relocate to avoid the levy. Newsom warned of the “impact as it relates to the flow of capital, the impacts on the market,” adding that the proposal, driven by SEIU-UHW, “is not the answer.”
The proposed tax would apply to California residents with a net worth exceeding $1 billion as of , allowing taxpayers to spread payments over five years with additional costs.
SEIU-UHW defends the tax as a necessary measure, arguing that billionaires currently pay a disproportionately low tax rate compared to working families. Trevor Foreman, an SEIU member and hospital security officer in Sacramento, stated that the tax is a matter of fairness. However, the union’s proposal is also linked to preventing potential cuts to federal healthcare funding in 2026, a point Newsom did not directly address in his criticisms.
The debate over the wealth tax comes as other states and cities grapple with similar proposals. New York City Mayor Zohran Mamdani has proposed a wealth tax to address a roughly $12 billion budget gap, and prominent progressive Democrats, including Senator Elizabeth Warren, have endorsed national wealth tax proposals. The underlying impulse, according to analysts, is to avoid difficult fiscal decisions by increasing taxes on a narrow group of high-net-worth individuals.
Critics of wealth taxes argue they are economically damaging, potentially discouraging investment and leading to capital flight. The Arbeitgeberverband BDA, a German employer association, has criticized similar proposals, warning they could lead to capital leaving the country. A study commissioned by Germany’s Left Party suggests a wealth tax could generate up to 150 billion euros annually, but even the study’s author, Stefan Bach of the German Institute for Economic Research, cautioned that some individuals might move assets abroad, reducing the actual revenue collected.
The outcome of the California proposal remains uncertain as supporters gather signatures to qualify for the November ballot. Governor Newsom’s vocal opposition, however, signals a formidable challenge for the union-backed initiative. The debate highlights the ongoing tension between the desire for increased revenue and concerns about the potential economic consequences of taxing wealth.
Other Democrats vying to succeed Newsom as governor are also reportedly not backing the proposal, according to a recent report, further diminishing its chances of success.
