Billionaire tax proposal faces hurdles as it moves closer to November ballot

A contentious proposal to tax California billionaires to alleviate federal healthcare cuts moved closer to landing on the November ballot this week, but efforts to defeat the measure before it reaches voters have already escalated.

The California secretary of state’s office said Wednesday that the proposal had enough valid signatures to be eligible for the Nov. 3 ballot. But discussions that have included the governor’s administration and lawmakers are underway about a potential deal that could prevent the initiative from being put in front of voters, according to people familiar with the negotiations.

Supporters have until June 25 to withdraw the initiative or go forward with placing it on the ballot. The negotiations highlight the escalating debate surrounding the billionaire tax, an idea that has divided the Democratic Party and drawn fresh opposition from healthcare and education groups. The negotiations are in flux, and the outcome remains uncertain.

Backers of the proposed tax say it’s crucial to compensate for federal healthcare funding cuts, approved by President Trump and the Republican-controlled Congress, that will harm millions of the state’s most vulnerable residents. In April, supporters of the billionaire tax submitted nearly 1.6 million signatures, roughly double the number needed to qualify.

The initiative would impose a one-time tax of up to 5% on taxpayers and trusts with assets valued at more than $1 billion, with some exceptions, such as property. The levy could be paid over five years. Ninety percent of the revenue would fund healthcare programs, and the remaining funds would be spent on food assistance and education programs. The proposal would cost the state’s richest residents about $100 billion if a majority of voters support it.

A poll released in March showed 52% of registered voters supported the billionaire’s tax, while 33% said they opposed it. Fifteen percent were undecided. The survey was conducted by UC Berkeley’s Institute of Governmental Studies and co-sponsored by The Times.

Opponents of the measure say the proposal is an ineffective attempt to address the long-term effects of the healthcare cuts and would harm California’s economy and budget.

The state budget in California is already largely dependent on income taxes paid by its highest earners. Because of that, revenues are prone to volatility, hinging on capital gains from investments, bonuses to executives and windfalls from new stock offerings, and are notoriously difficult for the state to predict.

The proposal already triggered a fierce debate, accentuating the divide between the rich and poor in a state that’s expensive to live in.

The Service Employees International Union-United Healthcare Workers West and other supporters of the billionaire tax say that it would raise $100 billion, offsetting federal funding cuts to healthcare as well as funding education and state food assistance. The SEIU-UHWW has spent more than $31 million qualifying the proposal for the ballot.

“David won the second round against Goliath, but healthcare workers and our allies won’t quit until we protect patients from the looming California healthcare collapse manufactured by Trump and Congress,” said Debru Carthan, a spokeswoman for the Billionaire Tax Now Coalition in a statement. The SEIU-UHWW funds the group.

But supporters face strong opposition from billionaires and influential groups with deep pockets. Tech executives and other business leaders oppose the idea and some have moved to other states. Opponents say taxing billionaires would harm California’s economy while not addressing underlying financial issues.

Campaign efforts against the proposal intensified this week with the launch of a new bipartisan coalition that’s fighting the wealth tax proposal. The group, called the Californians to Protect Funding for Schools, Healthcare and Public Safety, posted a long list of opponents that include healthcare groups, labor unions, business organizations, politicians and more.

An ad released by the group calls the wealth tax “a dangerous experiment” that could cost Californians tax revenue, send jobs out of state and cut funding. Planned Parenthood, the California School Boards Assn. and labor unions are cited in the ad as opponents.

“California can’t afford the reckless wealth tax experiment,” the ad says. The California Primary Care Assn. and California Medical Assn. are funding the coalition.

Jodi Hicks, chief executive and president of Planned Parenthood Affiliates of California, said that while the group believes that the wealthy should pay their fair share of taxes, the proposal fails to get at the root of the problem.

“We believe that this particular measure is shortsighted, doesn’t have specificity and accountability. It’s volatile,” she said.

The group wants to focus on holding Congress accountable and restoring critical funding rather than finding a “temporary solution that may do more harm,” Hicks said.

The proposal also has divided progressive politicians, including influential members of the Democratic Party. California Gov. Gavin Newsom spoke out against the billionaire tax, expressing fears that those wealthy residents would move out of the state. But U.S. lawmakers such as Rep. Ro Khanna (D-Fremont) and Sen. Bernie Sanders (I-Vt.) have backed a billionaire tax, saying the rich should pay their fair share to fund essential services.

Newsom tried to stop the proposal’s supporters from placing it on the ballot because he feared it would affect the state’s finances regardless of whether voters approved it, according to a person connected to the governor who was involved in the negotiations. After these efforts failed, the governor’s advisors sought to create a broad coalition opposing the proposal to weaken the union’s bargaining powers.

The union proposing the billionaire tax urged Newsom on Thursday to support a bill enacting a 2% tax on the state’s billionaires and said that if he got it approved by the state Legislature, it would withdraw its proposed ballot measure by the June 25 deadline.

Saying that Newsom has vocalized how devastating the federal healthcare funding cuts will be to California’s most vulnerable residents, a coalition funded by the union argued in an open letter that their proposed stopgap measure could prevent needless patient deaths.

“Governor Newsom, you have taken bold action when California needed it in the past,” the letter read. “This is one of those moments. The ask is clear. The timeline is tight but achievable. And the payoff — preventing widespread hospital and community clinic closures and saving patient lives — is real and immediate.”

Business executives have already poured millions of dollars into groups that oppose the billionaire tax or are promoting alternative solutions to wealth inequality.

Tech executives, venture capitalists and business leaders have donated roughly $118 million to a nonprofit called Building a Better California, according to data on the secretary of state’s website. Most of the funding comes from Google co-founder Sergey Brin, who has given more than $82 million to the group. Executives from DoorDash, Ripple, Stripe and other companies also have contributed.

The group says it supports policies such as expanding access to affordable housing, protecting innovation, requiring government transparency and securing more stable education funding.

PayPal and Palantir co-founder Peter Thiel has contributed $3 million to the California Business Roundtable, which opposes the tax. Former Google Chief Executive Eric Schmidt donated $1 million to that group as well.

California would probably collect tens of billions of dollars from the wealth tax if it passed, but it could also lose other tax revenue, a December letter from the state legislative analyst’s office said. The office also mentioned that it’s tough to predict the exact amount the state would collect due to factors that can affect a billionaire’s wealth, such as fluctuating stock prices.

California billionaires who were residents of the state as of Jan. 1 would be affected by the ballot measure if it passes. Some wealthy residents announced plans to move out of state. On Dec. 31, venture capitalist David Sacks announced he was opening an office in Austin, Texas, the same day Thiel publicized his firm had opened a new office in Miami.

Measures that could nullify the billionaire tax are another hurdle facing the initiative’s supporters. One initiative known as the Improving Transparency, Effectiveness & Efficiency in California Government Act could cancel out the billionaire tax..

It appears likely that the transparency act will also qualify for the ballot, as its supporters have said they’ve gathered enough signatures. If voters approve conflicting ballot measures, the one with more “yes” votes would take effect.