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Economy & Your Money

California votes Tuesday on one-time 5% tax on billionaires' wealth

Backers say Proposition 40 would pay for health care, while Gov. Gavin Newsom and more than 100 economists oppose it.

14 news outlets reported this
Liberal7 outletsDemocratic leaders versus their voters on Prop 40Center4 outletsA billionaire's threat to leave, divided DemocratsConservative3 outletsBillionaires and economists warn wealth is fleeing
Published 3 min readMoney and daily life
Overview

Californians vote on Tuesday, Nov. 3, on , a one-time 5% tax on billionaires' wealth. The lead sponsor is the union SEIU-United Healthcare Workers West. Backers say it would raise about $100 billion.

The Guardian reports that nine-tenths of the money would go to health care. Union president Dave Regan has described the measure as a five-year stopgap meant to make up for cuts in federal health spending. Two Stanford researchers, Benjamin Jaros and Joshua Rauh, estimate the tax would bring in $28 billion to $36 billion, according to the New York Post.

The Post says they also expect it to eliminate billions of dollars a year in income tax payments from wealthy people who move away. The union dismissed the research. More than 100 economists signed an open letter urging voters to reject the tax.

Gov. Gavin Newsom and Xavier Becerra, the front-runner to succeed him, oppose it. The California Democratic Party's executive board endorsed it in early August. The Post says two other measures backed by Google co-founder Sergey Brin could invalidate key parts of the tax if they win more votes.

Key figures
  • At least 7 billionaires, nearly $540 billion billionaires and combined fortune that a Stanford study, as cited by the New York Post, says have severed ties with the state — New York Post
  • $100 billion revenue Prop. 40 advocates say the tax would raise — New York Post
  • $28 billion to $36 billion revenue estimated by Stanford researchers Jaros and Rauh — New York Post
  • $340 million at least this much raised by opponents, according to the Guardian — The Guardian (US)
  • 46% to 43% likely voters for and against, in one October poll — New York Post

Three sides of the story

Liberal7 outlets

Democratic leaders versus their voters on Prop 40

A Guardian column puts Democratic leaders at the center. It cites a summer poll in which California Democrats favored Proposition 40 by more than 4 to 1, yet Newsom, Becerra and Los Angeles mayor Karen Bass line up with billionaires who, it says, have raised upward of $340m against it. It says party leaders are offering "a kinder, gentler oligarchy," notes that nine-tenths of proceeds would go to health care, and quotes Amar Shergill, whom it describes as a former chair of the state party's Progressive Caucus.

A first-person Guardian piece by wealthy Californian George Zimmer of Patriotic Millionaires argues billionaires would not flee en masse and that the money would protect hospitals and coverage. NPR's headline says two economists studied the tax and reached "wildly different conclusions." The New York Times frames the vote as a test for a national wealth tax and the Democratic debate over raising revenue.

Center4 outlets

A billionaire's threat to leave, divided Democrats

Forbes reports that "PayPal Mafia" billionaire Max Levchin told Bloomberg he is "unabashedly against this particular tax" and will "probably" leave California if it passes. NewsNation says the measure divides California Democrats and draws "myriad questions," noting that a yes vote would back a one-time 5% tax on billionaires' wealth.

Conservative3 outlets

Billionaires and economists warn wealth is fleeing

The New York Post opens with Don Hankey, a car loan executive who told the California Post he left the state in December, just ahead of the residency deadline. Hankey says California gave up years of income tax revenue by pushing wealthy residents out. The paper then cites an open letter from more than 100 economists urging a no vote, and a Stanford study that found at least seven billionaires have cut ties with the state.

It gives the Stanford researchers' estimate of $28 billion to $36 billion in revenue. The union, it says, told CBS News the aim is to make billionaires pay their "fair share." Sources told the California Post that opponents are preparing a legal challenge if Proposition 40 passes, and Rob Lapsley of the California Business Roundtable says: "We're fully prepared to litigate should it become necessary."

The Post also reports that Newsom and Becerra oppose the tax. National Review, under the title "California's Act of Fiscal Self-Sabotage," argues the tax would probably cost the state government more than it brings in.

Where outlets disagree
  • How many billionaires have left California over the proposed tax
Money and daily life

Backers say most of the money would go to health care, and the Guardian puts the share at nine-tenths. The Guardian, citing the New York Times, says California could lose about $100 billion in federal money over the next five years. That, it says, threatens coverage for "millions of low-income residents" and brings "the potential closure of hospitals and other facilities." Stanford researchers estimate the tax would raise $28 billion to $36 billion, according to the New York Post.

All sources: 17 articles from 14 outlets

Liberal (10)

Center (4)

Conservative (3)

Ballot measure

A law or constitutional change that voters approve or reject directly at the polls, alongside the candidates. Names vary by state: proposition, initiative, referendum, amendment.

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Medicaid

Public health coverage for people with low incomes, paid by the federal government and the states. The rules differ by state.

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