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Newsom breaks with socialists over billionaire tax as California voters appear poised to reject it
California voters appeared likely to reject Proposition 40, a proposed one-off 5% tax on billionaires’ wealth, according to results reported on Wednesday afternoon. The measure became a point of disagreement among Democrats: the Democratic Socialists of America backed it, while Governor Gavin Newsom opposed it, citing concerns about the state’s competitiveness and the initiative’s design.
The tax would have covered assets including businesses, securities, art and intellectual property, with exemptions for some pensions, property and retirement accounts. The DSA said it targeted about 250 Californians with roughly $2 trillion in combined wealth and could help address a projected $100 billion federal funding shortfall for Medi-Cal; the proposal allocated 90% of proceeds to healthcare and 10% to education, food assistance and administration. Critics, including economist Richard Stern, argued it could encourage people and businesses to leave California, while Newsom said opposition came from several groups, including teachers, firefighters and labour organisations.
In short
- California’s proposed 5% billionaire tax appeared headed for defeat.
- The DSA supported it; Governor Newsom opposed it.
- Most proceeds were earmarked for healthcare.
Steelman: both sides, in good faith
The strongest fair case each way — we don't pick a winner.
The case for
Supporters argue that a one-off levy on the exceptionally large fortunes of roughly 250 Californians could raise substantial funds for healthcare and other public services, helping offset a projected federal shortfall for Medi-Cal. They see the tax as a way to ask those most able to contribute to protect programmes that benefit people across the state.
The case against
Opponents argue that taxing a broad range of wealth, including business interests and securities, could prompt some wealthy residents or businesses to leave, weakening California’s tax base and economy. They also question whether the measure’s design would reliably raise the promised revenue, and say its potential costs to the state’s competitiveness outweigh the case for a one-off tax.
Explained simply
California has no personal wealth tax, so taxing a person’s assets would be a different approach from taxing their income. A one-off levy on very large fortunes would raise money for public services, but valuing assets such as private businesses and art can be complex.
The Democratic Socialists of America is a left-wing political organisation that campaigns for policies including higher taxes on the wealthy. Gavin Newsom is California’s Democratic governor; he has raised concerns about how the proposed tax was designed and whether it could affect the state’s ability to attract residents and businesses.
Medi-Cal is California’s public health insurance programme for people on low incomes and those with disabilities. The debate over the tax reflects wider questions about how to fund healthcare and education, and how a state tax might affect people and companies with substantial assets.
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