The pitch behind California’s billionaire tax proposal is simple: Tax the richest residents in the nation’s wealthiest state to offset steep federal cuts to healthcare, food assistance, and education.
But if approved by voters in November, it’s unclear how much money the ballot initiative would raise, how quickly the funding would become available, and how lawmakers would spend it.
The measure would steer proceeds from a first-in-the-nation wealth tax to a state healthcare fund, giving the governor and lawmakers the power to decide how to spend what California’s nonpartisan legislative analyst estimated would be “tens of billions of dollars.” Backers say it could raise up to $100 billion over five years to keep hospitals and emergency rooms open and preserve insurance coverage for millions of Californians. Yet, community health centers, doctors, and other healthcare entities that might benefit from such a cash infusion argue that the union spearheading the measure has readied a blank check for politicians.
“I’m not sure that you can say, with full security, that this will stop clinics from being closed or healthcare workers from being laid off, or people from losing their healthcare,” said Chris Hoene, executive director of the California Budget & Policy Center, a left-leaning nonprofit.
California’s billionaire tax promises healthcare relief. The fine print is murkier.
Taxing the Ultrarich
Put on the ballot by one of California’s largest healthcare unions, Proposition 40 would impose a one-time 5% tax on roughly 200 Californians with a net worth of at least $1 billion, including most of their stock holdings, yachts, and artwork. It would apply to those who were residents of California on Jan. 1, 2026. Real estate, pensions, and retirement accounts would generally be exempt.
The revenue raised is intended to offset the roughly $30 billion a year in anticipated losses to the Golden State from congressional Republicans’ One Big Beautiful Bill Act. Over the next four years, state and federal funding cuts are projected to nearly double California’s uninsured population, which stands at about 2.4 million people, according to the University of California-Berkeley Labor Center.
Securing additional tax revenue is essential because state lawmakers have yet to come up with a way to pay for healthcare services that will be affected by the cuts, said Dave Regan, president of Service Employees International Union-United Healthcare Workers West, which represents hospital workers and got the wealth tax on the ballot. It would earmark 90% of the tax revenue for healthcare, while the remaining 10% would be split between food assistance and education at lawmakers’ discretion. Regan said such broad categories would give politicians flexibility to be more responsive to the looming cuts.
“Figuring out or predicting exactly what the fallout will be, of where reductions and cuts get made, in a complicated healthcare system, it’s just too difficult to predict,” Regan said.
Among the choices the next governor and lawmakers will face are whether to provide healthcare to people cut off by the new federal Medicaid work requirements, reverse state rollbacks limiting coverage for immigrants with legal status, or raise the low physician reimbursement rates that make some providers reluctant to accept patients enrolled in Medi-Cal, the state’s version of Medicaid.
Lawmakers could also shore up subsidies on Covered California, the state’s health insurance marketplace, whose enrollees have seen their premiums skyrocket after losing millions in federal assistance after Congress last year let enhanced subsides expire.
Most of the money must be spent on health, but healthcare experts said the measure’s ambiguous language could allow lawmakers to use the new billionaire health fund to replace existing state dollars, contrary to the text of the proposition.
“A lot of times these propositions are written in a way to get attention and get support,” said Glenn Melnick, a healthcare economist at the University of Southern California. “But in fact, they can be used for other things later.”
Instead, the healthcare industry is pushing for a long-term funding plan. René Bravo, a pediatrician in San Luis Obispo County and the president of the California Medical Association, worries that a one-time infusion of tax dollars “is going to run out.”
“We need to work on a more sustainable, durable funding mechanism for the Medi-Cal system,” he said.
At the same time, doctors are asking him what will happen when the biggest Medi-Cal eligibility cuts begin to take effect next year. Even if voters approve the ballot measure, the money wouldn’t be available for at least a few months while the state collects the tax. And billionaires could spread their payments over five years.
Californians Divided
Pasadena resident Lynne Wines, a 72-year-old retired banker, knows the state needs the money. But she worries that wealthy investors will see the measure as a precedent and flee the state. Even though the ballot measure is clear that it’s a one-time tax, Wines said it’s a slippery slope.
“Taxes have a way of being needed over and over, and politicians have a way of finding those needs,” Wines said. “So, I don’t really feel secure that this is just a one-time thing.”
She noted that Google co-founder and billionaire Sergey Brin bought a home in Nevada and moved some of his businesses to the Silver State late last year. He is backing ad campaigns opposing the measure. Brin has given more than $100 million to a nonprofit promoting two competing measures, Propositions 41 and 42, designed to blunt or block it, according to contributions filed with the secretary of state’s office. One would count some new state taxes toward California’s overall spending limit and require the state auditor to review new state tax proposals before voters weigh in. The other would prohibit new state taxes on personal property, intellectual property, retirement accounts, and other assets.
GOP gubernatorial candidate Steve Hilton, who has been endorsed by President Donald Trump, warned on CNN in June that just the threat of the tax “has sent trillions of dollars, by some estimates, of wealth leaving the state.” A March study by the conservative Hoover Institution at Stanford University projected that the billionaire tax would cost California $25 billion, citing, in part, the lost revenue from billionaires who have already left the state.
California voters appear torn over departing billionaires. Two independent September polls suggested voter support for Proposition 40 varied from a low of 45% to a high of 52%.
Pasadena resident Steve Erler, 74, works full-time as a building manager because he can’t afford to retire. He worries that federal cuts will hurt children and seniors.
“These people who are making all this money, they can never spend it all. What are they going to do, buy another house in the Hamptons, buy another jet? They don’t need that,” Erler said while out walking his dog in August. “They need to be able to say when they go to bed at night, ‘I helped a child with healthcare. I helped a senior get fed.’ That’s what’s important,” he said.
Democrats are divided — one of many ideological fights playing out nationwide this election cycle as progressives take on more centrist candidates. U.S. Sen. Bernie Sanders (I-Vt.) and the California Democratic Party have endorsed Proposition 40, while Gov. Gavin Newsom, who is exploring a presidential bid, and Democratic gubernatorial nominee Xavier Becerra oppose it while saying that ultrawealthy or high-earning people should pay more. “It’s time for an economic reset, a true minimum tax on billionaires that, well, ensures the people at the very top pay at least the tax rate their own workers pay,” said Newsom, who supports a federal wealth tax, although legislation for a federal wealth tax in Congress has stalled.
If voters approve the ballot measure, political analysts said, it could show other states that taxing the wealthy may help close budget gaps and pay for essential services. Already several Democratic states, including Hawai‘i, Maine, Massachusetts, and Rhode Island, have approved millionaire taxes, but those have been limited to income, not overall wealth. Voters in Washington state will decide this fall whether to keep their millionaire tax.
“I do think this is just the beginning of these proposals nationwide,” said Melnick, the USC healthcare economist.