A California measure to tax the net worth of billionaires that divided liberal leaders nationally and triggered one of the most expensive ballot fights in state history was too early to call Wednesday morning as the vote tally continued.
Proposition 40 would impose a one-time 5% tax on the wealth of Californians whose net worth exceeds $1 billion, with most of the revenue dedicated to replacing federal funding cuts to healthcare. The measure left the ultra-rich, some of whom spent heavily to defeat it, scrambling to figure out whether they would pay the tax or leave California.
Vermont Sen. Bernie Sanders framed the proposal as a monumental step toward reining in deep wealth inequality by ensuring the ultra-rich pay their fair share. But Democratic Gov. Gavin Newsom warned it would prompt the state’s wealthiest to move out of California and take their tax money with them.
With almost 6 million votes yet to be counted, the AP Decision Team will wait for additional vote results before declaring a winner.
Opponents of the proposed one-time tax on billionaires have outnumbered supporters across most of the state. “No” has sizable leads in the Inland/Central Valley region and the San Diego and Orange County area, and smaller leads along the central coast and in the Bay Area. “Yes” votes led narrowly in Los Angeles County and the northern coast.
The “no” side raised roughly 10 times as much as the “yes” side, thanks in large part to tech moguls and venture capitalists, who poured millions into a political action committee fighting the measure. Some billionaires, including Google co-founders Sergey Brin and Larry Page, started cutting ties with the state in anticipation of the proposed tax. Mark Zuckerberg said he would stay in California for eight years and made a deal with Meta that would help him pay the tax without losing his ownership stake in the company.
Backers of the proposed tax, led by the powerful labor union SEIU United Healthcare Workers West, said it was needed to help the state backfill the federal funding cuts. The union estimates the state will lose $100 billion in federal healthcare funding over five years.
“It’s time to collect those taxes so we can ensure that our healthcare system is still safe,” said Lorena Gonzalez, president of the California Federation of Labor Unions.
But some traditional Democratic allies, including Planned Parenthood and the California Teachers Association, are part of a coalition that opposed it. They’re concerned about how the tax revenue would be divvied up and about the potential impact on the state’s budget if there’s a mass exodus of wealthy taxpayers. California’s budget relies heavily on the income tax of the state’s richest residents.
Robert Swonger, an auto glass technician living near Sacramento who’s politically independent, said he planned to vote against it.
“Obviously, I would like billionaires not to have as much money as they do,” he said. “But I don’t believe taxing them out of existence is going to work.”
Anthony Serrano, a Democrat living in Folsom who works for Kaiser Permanente, one of the nation’s largest not-for-profit healthcare plans, said he was leaning toward voting for the tax because he tends to support “anything that is a positive for healthcare.”
Even if the measure wins approval from a majority of voters, it would be blocked from taking effect if at least one of two measures designed to nullify it — Propositions 41 and 42 — passes and receives more “yes” votes. The proposals, which are backed by the political action committee Building a Better California, include a ban on new taxes on financial assets and other personal property, a category that excludes real estate. The committee raised more than $333 million, about 30% of it from Brin.
Progressive politicians, including Sanders and Massachusetts Sen. Elizabeth Warren, have long supported a federal wealth tax. Newsom said a California wealth tax would disadvantage the state, but he supports a national minimum tax on anyone with a net worth above $100 million.
Days before Sanders held rallies in California cities last month urging voters to support the state measure, Newsom told reporters that the senator’s focus on wealth inequality was “spot-on.” But he said that “on this issue, we fundamentally disagree.”
Even if the proposed billionaire tax fails in California, the battle over the measure ignited a crucial dialogue on the issue, Gonzalez said.
“We are taking a step forward, and we are showing other states that you can look them in the eye — you can look these billionaires in the eye — and take them on,” she said.
—Sophie Austin, Associated Press