A California labor union has proposed reducing its controversial one-time tax on billionaires by more than half, following significant pushback from critics, including Governor Gavin Newsom. The Service Employees International Union Healthcare Workers West, which initially sought a 5% tax on individuals with a net worth exceeding $1 billion, announced Thursday it would support a 2% levy if the governor would endorse it.
Ballot Qualification and Revised Proposal
The original 5% tax proposal had recently gathered enough signatures to qualify for the November ballot, according to Secretary of State Shirley Weber. However, the union's revised offer would require the measure to pass through the state Legislature by a June 25 deadline. The proposed tax, intended for individuals residing in California as of January 1, 2026, was projected to generate $100 billion. These funds were earmarked primarily to offset federal cuts to healthcare for low-income residents, with additional allocations for food assistance and education programs.
Backers of the proposal stated in a letter to Governor Newsom that a 2% one-time tax on accumulated wealth is a "modest" amount, particularly if it ensures the continued operation of emergency rooms and saves lives. Newsom's office has not yet commented on the union's revised offer.
Opposition and Financial Backing
The proposal has faced staunch opposition from a broad range of entities, including Governor Newsom, the California Medical Association, and the California School Boards Association. Tech industry leaders, such as Google co-founder Sergey Brin, have also mobilized against the measure. Brin has reportedly donated $82 million to a committee opposing the tax, which has raised over $118 million from fewer than a dozen donors.
Critics argue that the original measure could lead to a decrease in state revenue over time. They contend that the ultrawealthy might leave the state to avoid the tax, taking their contributions to income taxes with them. This scenario could significantly impact California, where the top 1% of earners contribute nearly half of the state's personal income tax revenue.
Roger Salazar, spokesperson for the political committee Golden State Promise, called the measure "flawed" and an "wrong approach for California’s small businesses and working families."
The nonpartisan Legislative Analyst's Office estimated that while the 5% tax might generate tens of billions in its initial years, subsequent annual income tax revenues could decline by hundreds of millions of dollars.
Legislative Actions and Alternative Revenue Streams
In parallel to the billionaire tax debate, state lawmakers have passed budget bills this week that aim to secure revenue through other means. One such measure involves extending a tax on healthcare providers. Senate President pro Tempore Monique Limón indicated that legislative leaders and the Governor concur with this approach to address the state's long-term structural deficit, stating that the current budget negotiations do not include the billionaire's tax.
The debate over taxing the wealthy has intensified nationwide, partly in response to tax legislation enacted in recent years. The California proposal has already created divisions among Democrats and major labor unions, sparking an expensive campaign to oppose it. Notably, a similar 2022 ballot measure in California that proposed increasing taxes on the wealthy to fund programs for electric vehicles was rejected by voters.