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California’s billionaire tax is dividing Democrats
The fight over the state’s ballot measure has national stakes
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EVERY POLITICAL PARTY likes a villain. In this cycle, Republicans are rallying against socialists; some warn against Muslims, too. For Democrats, there is no easier target than billionaires, the ultimate baddies in what the party’s left flank continues to call, hopefully, late-stage capitalism. In California this generalised angst has a specific target. On November 3rd voters in the state will decide whether to pass Proposition 40, which would impose a one-time, 5% wealth tax on roughly 260 billionaires to pay for public health care. At a rally in Los Angeles this month, Bernie Sanders, a left-wing senator for Vermont, declared Prop 40 to be “the most important ballot item in the country”.
Complaining about billionaires, though, is easier than devising coherent policy to punish them. Few Californians have sympathy for tech barons who have lately taken to musing about whether humanity will, or should, survive AI. But fear that the levy would drive billionaires from the state—threatening California’s innovation economy and its tax base—has made the measure controversial. In midterm races across the country, Democratic politicians have tapped into voters’ populist anger. As they consider populist policies, the battle in California may offer a cautionary tale.
For Gavin Newsom, California’s term-limited Democratic governor, the fight is a continuing headache. He has previously opposed wealth taxes put forward by the Democratic supermajority in the state legislature. His scepticism extends to Prop 40, which he tried to keep off the ballot and is now campaigning against. “I don’t think it’s a good idea to do it at state level,” he told reporters recently in New Hampshire. “It’s a badly written initiative.” Mr Newsom, not wanting to look a sop ahead of a potential presidential campaign, has instead suggested that America could squeeze the rich by tinkering with the federal tax code.
Ro Khanna, a congressman for part of Silicon Valley who has also been making conspicuous visits to states that have early presidential primaries, points to Mr Newsom’s opposition as proof that he is in the pocket of billionaires. “Gavin, you can’t pretend to be anti-Trump while doing the bidding of Trump’s donors,” he told the crowd at the rally in Los Angeles with Mr Sanders. The danger, for Democrats, is that infighting and incoherent policy further degrades their standing with voters. When Mr Khanna asked the crowd, “what does the Democratic Party stand for?”, he seemed to expect a rousing reply. More than one person yelled back: “Nothing!”
Bickering among Democrats has spread to labour groups. Prop 40 was cooked up by Dave Regan, the boss of SEIU-United Healthcare Workers West, who wanted to find a way to compensate for health-care cuts in Donald Trump’s One Big Beautiful Bill Act, passed last year. But several unions oppose the tax, and have accused Mr Regan of bullying and harassing fellow labour leaders to get his way. Mr Regan dismisses the allegations as “a shoot-the-messenger smear campaign”. He adds that other unions “should be ashamed of themselves” for stooping so low as “to carry water for Governor Newsom and the billionaires”.
Prop 40 needs just a simple majority to pass. However, it seems to be losing support as election day nears. A new poll from the Public Policy Institute of California suggests that 46% of Californians support the tax, down from 52% in September. Some voters may be turned off by the toxicity and confusion the tax has spawned; others may simply have ballot-measure fatigue. Billionaires upset by the measure are supporting two other statewide initiatives that would nullify Prop 40 and prevent similar taxes in future. Sergey Brin, a co-founder of Google, has donated $102m (or about $2.60 per Californian) to that effort. The pro- and anti-billionaire tax measures—along with all manner of state and local propositions—mean that ballots can be tediously long. Those in Los Angeles take up nine pages.
Nearly 50 years ago California voters passed Proposition 13, which capped property taxes, permanently distorted the state’s housing market and inspired a national tax revolt. The hope (if you’re Mr Sanders) and worry (if you’re Mr Brin) is that California is again at the vanguard. Mr Sanders and Mr Khanna have introduced a bill in Congress that would impose an annual 5% wealth tax on America’s billionaires. Even if Prop 40 fails, other activity may follow. Xavier Becerra, a Democrat who looks set to become California’s next governor, has said he is considering a new income tax on the wealthy. “Let me tell the billionaires that what you guys are doing in California is not the end,” Mr Sanders told the crowd in Los Angeles. “It is the beginning.”
