Why California’s billionaire tax was a harder sell than expected
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Despite a nationwide blue wave in the midterm election, California’s much-debated billionaire tax didn’t get the support many expected in one of the country’s most liberal states.
Since the Golden State’s powerful healthcare union proposed the new tax, supporters of Proposition 40 have faced a fierce, expensive battle against the world’s richest people.
In what has been described as a David-versus-Goliath fight, the underdog appears to have lost. The proposition, which would have imposed a one-time 5% tax on the assets of California billionaires to mostly fund healthcare, seemed headed toward defeat as votes continued to be tallied Thursday.
The $293 million spent by California billionaires to oppose Proposition 40 is about 0.07% of their estimated wealth.
“In a deep blue state like California, most voters are going to support additional funding for healthcare, especially to replace Trump funding cuts,” said Dan Schnur, a politics and communications professor at USC, UC Berkeley and Pepperdine. “But in retrospect, the sponsors may wish they’ve been a little bit less ambitious.”
As of Thursday’s latest count, around 55% of California voters rejected the proposal while 45% voted yes on Proposition 40. Officials still needed to count millions of votes before they could declare final results.
Although more than half of voters in some urban counties, including Los Angeles and San Francisco, backed the billionaire tax proposal, it was behind in the vast majority of counties statewide. In Orange County, the vote against the tax was leading by more than 20%.
The battle over the billionaire tax has been one of the most expensive ballot-measure fights in California’s history, sparking a debate over wealth inequality and taxing the ultrawealthy. It also highlighted how billionaires have wielded more influence in politics.
Proposition 40 would affect hundreds of billionaires. Foes have funded two measures that could stymie 40 even if it passes.
Well-known politicians such as U.S. Sen. Bernie Sanders (I-Vt.), the California Democratic Party, healthcare workers and Hollywood celebrities including actor Mark Ruffalo, backed the wealth tax. But the idea drew opposition from California Gov. Gavin Newsom, the teachers union, Planned Parenthood, business groups and others who expressed fears that billionaires could flee the state.
The state’s next governor, Xavier Becerra, also opposed the tax.
Though California’s $4.25-trillion economy remains a global powerhouse and a major draw for investments in AI and aerospace, thousands of businesses have moved to Texas and other states in recent years due to lower costs.
Campaigns supporting and opposing the billionaire tax proposal are paying social media influencers, some with millions of followers, to post videos to inform and sway voters.
Opponents of the wealth tax heavily outspent Proposition 40 supporters, flooding televisions, radio, social media and smartphones with ads. Their message: the wealth tax is a reckless experiment and a tax on everyone, not just billionaires.
UC Berkeley law professor Brian Galle, who helped write the wealth tax proposal, said it’s tough to “fix a broken system” and get the facts to people when they were up against the ultrawealthy. Billionaires also own media outlets and social media companies, megaphones that help spread political messaging.
“When billionaires have half a dozen different strategies for buying this election, it shows that they already have too much money and pay too little back,” he said.
SEIU-United Healthcare Workers West President Dave Regan denied the allegations. He said he did not attempt to extort from union officials, or assault or threaten female labor leaders.
Support for the billionaire-bashing proposition had waned in recent months.
A poll by UC Berkeley’s Institute of Governmental Studies, co-sponsored by the Los Angeles Times and released last week, showed voter support for Proposition 40 had fallen to 42% from 52% in March.
The measure also may have lost fans because taxing assets rather than income can be a complicated and confusing process. It sparked concerns among even non-billionaires about whether they want to let the state start demanding a slice of the value of what they own. No matter the result, Proposition 40 also fueled a conversation about taxing billionaires that will continue beyond the election, Galle said.
Hundreds of millions of dollars were raised to support and oppose Proposition 40 along with two ballot measures — Propositions 41 and 42 — that could block the wealth tax, data from the California secretary of state show.
Money doesn’t always win an election, but a big funding imbalance is tough to overcome, Schnur said.
“As important as the money was to beat Prop. 40, the coalition against it may have been just as important. You didn’t see Sergey. You didn’t see tech billionaires in the ads. You saw teachers and nurses and firefighters,” he said.
The four richest Californians —Google co-founder Sergey Brin, Nvidia Chief Executive Jensen Huang; Google co-founder Larry Page and Meta Chief Executive Mark Zuckerberg — would owe 40% of the estimated taxes to be collected from the billionaire tax, according to an L.A. Times analysis.
The billionaire tax proposal faced other big hurdles. Proposition 42, which could have blocked the billionaire tax, was on track to pass. It would prohibit new taxes on “retirement holdings, individually-owned assets, and other forms of personal savings” and bar retroactive taxes.
“They didn’t just reject a single bad tax idea — millions of Californians backed the strongest protections available to protect their hard earned life savings from double taxation. They joined firefighters, law enforcement officers, building trades workers, seniors, veterans and small businesses in doing so,” said Nathan Click, a spokesman for Proposition 42.
Supporters of Proposition 40 tried to convince voters that taxing roughly 200 billionaires would raise the $100 billion needed to offset federal healthcare cuts.
This week, the wealth tax’s supporters emphasized the high stakes. People won’t be able to afford healthcare coverage, children will die and hospitals will shutter, they said, if California lawmakers don’t find a way to get more funding.
“If Sacramento fails to protect patients and deliver a real solution that makes billionaires pay their fair share, healthcare workers will pursue every available avenue, up to and including returning to the ballot in 2028 with a billionaire tax,” said Suzanne Jimenez, chief of staff for the SEIU-UHW.
