California Gov. Gavin Newsom, a Democrat, opposes the billionaire tax on voters’ ballots this November. So does Xavier Becerra, the Democratic gubernatorial candidate widely favored to succeed him.
That didn’t stop the state Democratic Party from narrowly endorsing it.
Proposition 40 would generate an estimated $100 billion by levying a one-time 5% tax on the state’s more than 200 billionaires. The bulk of the proceeds would go toward backfilling federal cuts to the state’s expansive low-income health program, Medi-Cal.
The idea has sparked controversy ever since a healthcare workers’ union proposed it late last year, prompting tech billionaires like Google co-founder Sergey Brin to move his business holdings out-of-state and pump millions of dollars into political committees to kill it.
After a contentious endorsement vote among the California Democratic Party’s top statewide activists and officials over the weekend, it’s shaping up to be the latest intra-Democratic fight exposing deep party divisions over November’s ballot.
“This is not a kumbaya measure,” said Nancy Tung, chair of the San Francisco Democratic Party, who voted against the endorsement on Sunday. “There are very serious disagreements among Democrats and Democratic institutions that are opposed to each other over the measure.”
The party’s endorsement validated the measure’s proponents, who can use the signal of support to campaign. They argue the revenue is critical to backfill federal cuts to Medicaid and food assistance that Republicans approved in President Donald Trump’s budget bill last year. Those cuts helped fund an extension of the 2017 Trump tax cuts that predominantly benefit the wealthiest Americans.
After Sunday’s vote, Dave Regan, president of SEIU United Healthcare Workers West, released a statement saying the “endorsement puts to rest the idea that California Democrats are not united by the billionaire tax — they are.”
But undecided liberal voters may be confused to see the party pitted against some of its highest-profile leaders. In addition to Newsom and Becerra, doctors’ and primary care providers’ associations oppose the billionaire tax, along with a variety of Democratic-aligned political powerhouses like Planned Parenthood. Several labor unions are opposed. The powerful, 750,000-member SEIU California last week chose not to take a position.
Opponents worry the tax would drive the wealthy out of the state, depriving California of both income tax revenue and spending. California’s progressive income tax system means its revenues are particularly dependent on the fortunes of the wealthy. Some interest groups are opposed, too, because the measure primarily dedicates its revenues toward a single state program: healthcare. The nonpartisan Legislative Analyst’s Office estimates it could reduce long-term state revenue.
“It’s not stable, it’s only temporary,” California Teachers Association president David Goldberg said in an interview last month. “It intentionally goes around public education funding, it cuts it out of receiving resources.”
The No campaign downplayed the party’s endorsement, pointing to the party’s 2024 opposition to Prop. 36, a crime measure which nonetheless passed overwhelmingly, and its support for Prop. 32, a minimum wage hike which failed.
Newsom, Becerra, CTA, California Professional Firefighters, Planned Parenthood and others are against Prop. 40 “because it’s bad for our budget, bad for our economy, and bad for our future,” the campaign said in a statement.
A nationwide populist uprising
Still, their biggest challenge is a voter base that wants to tax the rich.
“It’s a popular idea within the party,” said Chris Hannan, president of the State Building and Construction Trades Council, who spoke against Prop. 40 before a party committee over the weekend. “There’s a lot of passion along with the populist message.”
A nationwide movement to more aggressively tax wealth is gaining steam among progressive Democrats as inequality worsens. The top 1% of Americans held 22% of the nation’s household wealth in 1989; now they hold nearly a third. The bottom half’s share has declined from 3.5% to 2.5%. Prop. 40 is being watched closely by tax-the-rich activists around the country and has support from Rep. Ro Khanna and U.S. Sen. Bernie Sanders.
The nonpartisan Public Policy Institute of California found in May that 54% of Californians and more than 76% of Democrats surveyed supported the billionaire tax, which at that time had not officially qualified for the ballot.
For his part, Newsom, who is expected to launch a presidential campaign after he leaves office this year, is balancing that momentum with his opposition to Prop. 40 by proposing a series of federal tax reforms he calls a “national billionaire’s tax.”
They include reversing the 2017 tax cuts, a minimum tax rate on anyone making more than $100 million and closing loopholes that allow the wealthy to borrow from unrealized capital gains without paying income tax. He’s pairing his stances with talk of capturing and redistributing wealth generated by artificial intelligence, an issue with wide appeal among job-insecure Americans.
The No on 40 campaign, too, points to an alternative — Proposition 3, which would make permanent the existing top income tax rates on the state’s highest earners. Crucially for groups like CTA, Prop. 3 revenue would flow into the state’s general fund, about 40% of which is set aside for education, but would allow the rest to go toward other needs.
A desire among some leaders to meet populist demands drove the contentious, dramatic push for the party endorsement.
At first, the vote to endorse failed after supporters barely missed the 60% threshold needed for an endorsement from the over 200 state Democratic Party officials gathered. Opponents pushed for a formal “no consensus” position — a move that Democratic National Committee member David Atkins argued was “categorically weak” and would alienate voters “who already believe that we are in the pockets of corporations and billionaires.”
“It feels kind of weird to just sit out as a party and say, ‘We don’t really have an opinion on a billionaire tax in this moment,’” said Jane Natoli, a member of the party resolutions committee.
After several tense seconds of murmuring, two people changed their votes, setting up the final tally that made the endorsement official.
“It was cinematic,” Atkins said. “It was sort of a movie moment.”
Supporters said though nearly all Democrats there agreed wealthy Californians should pay more in taxes to fund social services, a majority didn’t buy opponents’ arguments that they should approach the issue more slowly and deliberately.
“Prop 40 is not perfect. I don’t think anyone will tell you it is,” Natoli said. “Maybe it doesn’t work, but at the same time, it just doesn’t really feel like a moment where we can be sitting on our hands and saying, ‘Eh, let’s go back and work at it another two years.’”