California’s Proposed Billionaire Tax Moves Toward Vote
Supporters of California’s billionaire tax initiative have announced that they’ve gathered enough signatures to push the measure to a public vote this fall. This development has generated a bit of buzz around the potential economic implications.
The Service Employees International Union of Western Health Workers (SEIU-UHW) is behind this tax proposal, with aims to keep hospitals and clinics operational, protect jobs in healthcare, and bolster funding for K-12 education and food assistance programs in the state.
However, critics argue that this tax could drive wealthy business owners out of California, leading to job losses and further weakening the state’s economy.
On Monday, the supporters turned in over 1.5 million signatures to the Board of Elections, part of a petition to have a statewide vote. For the initiative to make it onto the November ballot, approximately 875,000 registered voters need to approve it by June 24.
Complicating matters is another initiative known as the Transparency Act, which is also collecting signatures for the upcoming ballot. It aims to reduce national spending waste and enhance governmental transparency. Some reports suggest that if both measures are on the ballot and the Transparency Act garners more votes, it might jeopardize the billionaire tax.
What Exactly Is This Billionaire Tax?
The proposed tax would establish a one-time 5% levy on the net worth of millionaire residents, given that they meet certain asset thresholds. Those liable could opt for five annual installments with an additional 7.5% surcharge on any outstanding balances.
Who Would Be Impacted?
A billionaire residing in California as of January 1, 2026, would face tax obligations starting in 2027—potentially affecting around 255 eligible taxpayers. However, this number might drop since several prominent business leaders moved out of state after hearing about the tax proposal.
Notably, Google co-founders Larry Page and Sergey Brin were among those who reportedly relocated.
This tax is notably not based on income, which some consider a loophole allowing billionaires to pay less than average Americans. Instead, it focuses on their assets, including stock ownership in their companies. This distinction can lead to vastly different tax liabilities for the richest individuals.
For instance, the Tax Foundation predicted that DoorDash founder Tony Hsu might face a staggering $4.17 billion tax liability, potentially landing him in bankruptcy unless the valuation approach is legally challenged. In contrast, NVIDIA’s Jensen Huang could owe more than double that, at $8.5 billion, but he has stated that he could manage that payment.
Who Is Sponsoring the Initiative?
The SEIU-UHW, representing California’s healthcare workers, is driving the tax initiative forward, branding it as an “emergency tax.” They believe that passing this measure will help avert staffing shortages and service cuts in healthcare settings. The union anticipates that the One Big Beautiful Bill Act could cost nearly $100 billion in federal funding over the next five years.
How Will the Tax Be Calculated?
Individuals and trusts with assets exceeding $1 billion would be taxed on a variety of holdings, including businesses and securities, while excluding certain properties, retirement accounts, and pensions.
What Will the Tax Generate?
The California Billionaire Tax Act is expected to raise around $100 billion, according to its advocates.
Where Will This Money Be Allocated?
The potential funds are earmarked for various needs, including:
- Keeping hospitals, emergency rooms, clinics, and nursing homes adequately staffed.
- Stabilizing medical insurance premiums.
- Maintaining employment for healthcare workers.
- Funding K-14 public education resources and staffing.
- Supporting the California Food Assistance Program.
Arguments in Support of the Billionaire Tax
The Institute on Taxation and Economic Policy, a progressive think tank, has expressed its support for California’s billionaire tax, asserting that it would rectify inequities in the tax system. They emphasize that the wealthiest Americans have ways to live lavishly without selling their assets, which means they can sidestep paying their fair share of income tax.
Counterarguments to the Billionaire Tax
Conversely, the Tax Foundation has criticized the plan, noting that bold design choices could lead to the tax being much higher than intended. They warn of potential negative effects, such as forcing business founders to sell off significant portions of their stock in order to pay taxes, risking control over their companies. Such moves could impact stock prices negatively, consequently affecting many working Americans’ retirement savings.
The Hoover Institution has also weighed in, suggesting that the tax could inflict a financial hit to California upwards of $25 billion due to income tax losses from fleeing billionaires. Their calculations also estimate that the tax revenue might only reach $40 billion, which is significantly lower than projected.
Federal Wealth Tax Proposals
On a broader scale, Senator Bernie Sanders has long championed the idea of a national wealth tax. The latest version, called the Make Billionaires Pay Their Fair Share Act—co-sponsored by Rep. Ro Khanna—was presented in March and proposes an annual 5% tax on America’s billionaires, forecasted to generate $4.4 trillion over the next decade. Part of this bill includes delivering $3,000 in the first year to every individual in households earning $150,000 or less.
As of now, no action has been taken regarding this proposal.
