California Governor Gavin Newsom has failed to prevent a controversial one-time 5% tax on residents with a net worth exceeding $1 billion from appearing on the November ballot. The collapse of negotiations between Newsom's administration and the labor union SEIU-United Healthcare Workers West means the measure will now go before voters, potentially becoming one of the nation's most expensive and politically charged ballot fights over taxing the ultra-wealthy.
SEIU-UHW, the union leading the effort, stated that Newsom had not presented a viable solution to prevent hospital closures and address looming federal healthcare cuts. Debru Carthan, vice president for SEIU-United Healthcare Workers West, criticized the governor, saying he was "in lockstep with [President] Donald Trump and billionaires like Peter Thiel and Sergey Bin on this issue." The union argues the tax is necessary to offset federal healthcare reductions stemming from what they refer to as President Trump and Republicans’ “Big Beautiful Bill.”
Newsom and various business groups, including the Chamber of Commerce and the State Building and Construction Trades Council, had warned that a wealth tax could accelerate the departure of billionaires, investors, and startups from California. CalChamber previously issued a statement calling the measure "misguided" and warning it would "create a dangerous precedent."
Despite organizers offering to reduce the proposed tax from 5% to 2%, Newsom refused to back down last week. California is home to over 200 billionaires whose combined wealth exceeds $2 trillion. Supporters contend that a small portion of this wealth could preserve essential programs like Medi-Cal, hospitals, food assistance, and education, which are facing financial pressures. Opponents, however, argue that the state risks alienating wealthy taxpayers who contribute a disproportionate share of California's income tax revenue.
Several high-profile billionaires have already established ties elsewhere or relocated in recent years. These include Google co-founder Larry Page, Palantir co-founder Peter Thiel, Amazon founder Jeff Bezos, and Oracle founder Larry Ellison. Google co-founder Sergey Brin, SpaceX investor Steve Jurvetson, and AI executive Naveen Rao have reportedly moved to Nevada. Former Hewlett-Packard and eBay CEO Meg Whitman also recently sold her Northern California ranch amid the debate.
Through a group called Building A Better California, these wealthy individuals have funded competing ballot initiatives designed to counteract the billionaire tax. One such measure, also qualified for the November ballot, would mandate new audits for programs funded by state special taxes and includes provisions that critics suggest could create legal obstacles for implementing the billionaire tax. This strategy aims to provide opponents with multiple avenues to block the measure, even if voters approve it.
Dave Regan, president of SEIU-UHW, has a history of utilizing statewide ballot measures to influence negotiations with elected officials. Chris Hannan, president of the State Building and Construction Trades Council, publicly broke with other labor leaders, expressing concern that a retroactive wealth tax could discourage billionaires from financing major developments that employ thousands of union workers. He stated that such a tax would drive people and investment out of the state.
Newsom has previously argued that a California-only wealth tax would be difficult to enforce, susceptible to constitutional challenges, and might ultimately result in a net loss of revenue for the state if billionaires relocate. His office has stated that while the governor supports wealthy Americans paying their fair share, this specific measure is "poorly designed" and could negatively impact teachers, schools, clinics, and public safety.