California’s “Billionaires Tax” Is Imploding

This November, Californians will vote on Prop. 40, which would become the first wealth tax in modern U.S. history. But despite liberal rallying cries to “tax the rich,” Democrat leaders in the Golden State are scrambling to kill the proposal – implicitly acknowledging that progressive tax-and-spend schemes won’t deliver what they promise.

As Ballotpedia explains, Prop. 40 would specifically “levy a one-time 5% tax on the accumulated wealth of taxpayers and trusts with covered assets valued over $1 billion.” That tax would notably apply to “shares of capital stock, bonds or other evidences of indebtedness, and any legal or equitable interest.” The tax revenue would supposedly be used to fund “state health care programs, food assistance programs, and public education.”

Progressive leaders like Senator Bernie Sanders (I-VT) and California Congressman Ro Khanna, a potential 2028 presidential contender, have championed the proposal, which they hope will help build momentum for a national wealth tax.

Billionaires in the state would have the option to spread the payment out over five years, but they would be hit with a 7.5 percent charge on any unpaid balance – meaning the effective tax would be much higher than five percent. Moreover, the tax applies not just to income, but to the value of all assets, including stocks and bonds. This means that many wealthy individuals would have to sell stocks just to pay the tax, likely having ripple effects throughout the economy and affecting the portfolios of other far less wealthy individuals.

The politically powerful Service Employees International Union (SEIU), which represents health care workers, originally pushed for the idea.

“Massive cuts to federal health care funding are driving California towards a health care collapse,” a website for Prop. 40 explains. “The federal funding cuts will strip roughly $100 billion from California health care over the next five years.” Playing on populist sentiments, the SEIU says the money “would protect health care jobs and ensure working people and families can get the care they need.”

But Democrat Governor Gavin Newsom, another 2028 presidential contender, has come out against the proposal – no doubt recognizing that it would be economically disastrous for his state. Even the prospect of it passing has already led several billionaires to flee to states with more favorable tax policies.

Six of the state’s roughly 200 billionaires have left so far, according to Fortune. The tax would apply to anyone living in the state as of January 1, 2026, giving the wealthy a strong incentive to leave by December 31, 2025, as some did. These billionaires, including Peter Thiel, former Uber CEO Travis Kalanick, and Google co-founders Larry Page and Sergey Brin, would have collectively paid $27 billion of the projected $100 billion in revenue under the proposed tax.

Newsom said he will be voting no on Prop. 40. “We’re competing with 50 states,” he said in February. “Capital flows and move(s). That’s real. It’s not imagined. It’s very, very real,” the governor said, according to CNN.

However, Newsom has hardly abandoned the idea of a wealth tax – he just doesn’t want it in only his state. As AMAC Newsline reported last week, Newsom now supports a national wealth tax. While the wealthy can flee California, it is much more difficult for them to flee the country entirely.

The SEIU notably will be without many of its normal labor union ally foot soldiers as it looks to turn out voters this November. The Guardian reports that “powerful organizations in the state have also stepped in to oppose it.”

New opponents include “the California Teachers Association and the State Building and Construction Trades Council of California, along with health care groups, including the California Medical Association and Planned Parenthood Affiliates of California.”

The groups are driven by a healthy distrust of politicians to keep their word and questions about whether the tax will provide “long-term” stability.

“These groups say the ballot measure does not have a long-term funding path and has no guarantees that the one-time lump sum will go to those who need it most,” The Guardian reports.

Those concerns are valid, since the state faces nearly $75 billion in budget deficits in the next three years, according to projections from the California Legislature’s fiscal analysis team. California already has among the highest tax burdens in the country. Nothing in recent history suggests that money raised from a wealth tax would be spent any more wisely than the roughly $300 billion in taxes that the state already brings in. California has a spending problem, not a revenue problem.

The economic fallout from the tax could also be drastic, according to experts at the Tax Foundation.

Because of “poorly drafted” language, the law could effectively apply a more than 100 percent tax on certain assets. Wealth is fluid, so someone could be paying a tax on the former value of an asset that has since depreciated. Billionaires could also be forced to pay the tax based on the value of their voting shares in a company, even if that value is more than their actual stake in the company.

The law’s wording could also force billionaires to “sell off a significant portion of their shares” which “could send stock prices plummeting to the detriment of tech employees and investors of all stripes, including ordinary workers,” the Tax Foundation concluded.

Moreover, if the last 100 years of tax policy have proven anything, it’s that the government is never satisfied. The wealth tax may be targeting billionaires now, but inevitably their definition of who counts as “wealthy” will expand until it includes anyone who has managed to accumulate even a modest amount of wealth.

“Tax the rich” is a good bumper sticker slogan, and it’s an effective political tool for socialist politicians looking to stoke anger and resentment. But catchy slogans and soundbites that play well on TikTok and Instagram do not translate into sound economic policy.

Even California’s delusional Democrat leaders are beginning to acknowledge this reality. The only question is if they’ll be able to close the Pandora’s box that their rhetoric has opened. It will now be up to the voters to decide.

Matt Lamb is an AMAC Newsline contributor and associate editor for The College Fix. He previously worked for Students for Life of America, Students for Life Action, and Turning Point USA. He previously interned for Open the Books. His writing has also appeared in the Washington Examiner, The Federalist, LifeSiteNews, Human Life Review, Headline USA, and other outlets. The opinions expressed are his own. Follow him @mattlamb22 on X.