A controversial proposal to tax California’s billionaire class and use the money to fund social welfare programs will officially appear on the state’s November ballot, teeing up a battle between the union backing the wealth tax and the powerful players who have sought to kill it.

Gov. Gavin Newsom, a likely 2028 presidential contender, who has long opposed tax hikes on California’s ultrawealthy, is just one of a host of powerful forces in the Golden State who oppose the plan. The state’s richest residents, many of whom are in Silicon Valley, have spent millions on campaigns designed to erode voter support for the ballot measure.

But the measure prevailed. The tax well surpassed the state’s voter signature requirement for ballot proposals on June 18 and was solidified on the November ballot late Thursday evening after Newsom failed to strike a deal with the Service Employees International Union Healthcare Workers West, the labor union behind the measure, before the state’s finalization deadline.

“This is not how we should set California’s budget priorities,” Newsom wrote in an article on his Substack on Friday morning. “We can’t let a single advocacy organization, however well-intentioned, write the state’s tax code on its own terms.”

How the proposed billionaire tax works

The tax-the-rich approach has long been a pipe dream for progressive Democrats, but it has gained more traction since President Donald Trump signed his marquee tax and spending package into law last year. The One Big Beautiful Bill Act slashed federal spending on Medicaid, cut billions from Affordable Care Act marketplace subsidies and shifted the lion’s share of nutrition assistance program funding onto individual states.

The measure aims to generate $100 billion in revenue by levying a one-time tax of 5% on billionaires in California. That money would be used across the state to offset the impact of the Trump administration’s sweeping cuts to federal healthcare and nutrition assistance programs.

The union notes that 90% of the money would be used to sustain local hospitals, clinics and nursing homes that could otherwise face closure amid Medicaid funding cuts. The other 10% would be directed toward public education and state food assistance programs, according to the proposal. The funds would be accumulated and dispersed over multiple years.

Progressives in Washington, including Sen. Bernie Sanders, I-Vt., and Rep. Ro Khanna, D-Calif., have celebrated the California measure. But in a state like this, where politics are interwoven with an income tax system that relies on high earners and the tech economy, the reality is far more complicated.

Some labor unions oppose the tax

A host of labor unions and healthcare advocacy groups that typically align with SEIU-UHW have released statements opposing the group’s billionaire tax proposal. At issue is not whether the ultrawealthy should be taxed, it’s how.

The groups, which include the California Medical Association and Planned Parenthood Affiliates of California along with teachers and trade unions, have argued that the tax is a short-term fix that could lead to more budget volatility in the long run.

“California’s health care system cannot be built on temporary revenue spikes or uncertain funding streams. Patients, providers, and health care programs need reliable, sustainable funding, not a short-term fiscal fix that could ultimately reduce overall state revenues and make future budget shortfalls more severe,” the CMA board of trustees wrote in a statement denouncing the wealth tax.

The coalitions have also argued that the SEIU-UHW proposal doesn’t provide enough assurance that the tax revenue would actually benefit the state’s most vulnerable populations.

There are fears billionaires will leave the state

Newsom argued that a state-level wealth tax would drive billionaires out of California and lead to less income tax revenue in the long run. The state’s budget already relies heavily on income and capital gains taxes collected from high earners, which are used to fund public education and social services.

“There is nothing for housing, nothing for childcare, nothing for public safety workers who must answer 911 calls, and nothing for our public universities that have powered California’s economy for a decade,” Newsom said of the billionaire tax proposal.

Then there are the billionaires themselves. Silicon Valley’s biggest names have spent months funneling millions into killing the proposal, including Palantir co-founder Peter Thiel, Google co-founder Sergey Brin, DoorDash CEO Tony Xu and Chris Larsen, co-founder of the crypto company Ripple.

The New York Times reported in December that Thiel, who owns a personal investment firm in Los Angles, was considering other states to move his firm to.

Palmer Luckey, Oculus founder and co-founder of defense technology startup Anduril, said the tax would force “founders like me to sell huge chunks of our companies to pay for fraud, waste, and political favors for the organizations pushing this ballot initiative.”

But not all billionaires have rejected the initiative. Nvidia CEO Jensen Huang spoke alongside Rep. Ro Khanna, D-Calif., in support of the congressman’s “Make Billionaires Pay Their Fair Share Act” bill.

Huang even encouraged his peers to move to the state, saying at a Stanford University event in April, “I say to everybody, ‘Move to California, don’t leave.’ It’s the highest taxes in the world, but it’s OK.”

Newsom has offered an alternative plan

Newsom laid out his counterproposal, which came as a detailed plan for imposing a national billionaires tax and amending tax code loopholes, on Friday.

“A true minimum tax on billionaires — a modern Buffett Rule — that ensures the people at the very top pay at least the tax rate their own workers pay,” Newsom wrote.

The 2028 contender’s proposal included the establishment of a national public equity fund, the money for which would come in the form of artificial intelligence stakes for all Americans. It focused on addressing tax loopholes that allow the top 1% of earners to avoid paying income tax by borrowing against their stock portfolios and writing off charitable donations.

“When 10% of the people in this country own two-thirds of the wealth, when we have minted the first trillionaire in human history, and yet your wages have stagnated, and your healthcare costs have skyrocketed, something is fundamentally broken,” Newsom wrote.

“Over the decades, the American economy has been engineered for the very top, a story as old as time: Money buys influence, and influence rewrites the rules. Those rewritten rules funnel even more wealth to the few. Under this weight, democracy itself starts to buckle.”

The post What to know about California’s billionaire tax measure appeared first on MS NOW.

From MS Now.