Newsom rejects scaled-back California billionaire tax offer
A health care workers union offered to cut its California billionaire tax plan from 5% to 2%, but Gov. Gavin Newsom remains opposed.
By Sofia Marchetti · World Affairs Correspondent
3 min read
California Gov. Gavin Newsom is refusing to back a reduced billionaire tax proposal, keeping a high-profile fight alive after the original measure qualified for the November ballot. The dispute matters because the plan seeks to raise money for health care and safety-net programs while critics warn it could weaken the state’s tax base.
The Associated Press reported that Service Employees International Union Healthcare Workers West, the union sponsoring the measure, offered Thursday to drop its proposed one-time 5% tax on Californians with net worth above $1 billion if Newsom supported a 2% version instead.
Newsom did not accept the offer. Tara Gallegos, a spokesperson for the Democratic governor, said in a statement that reducing the rate would not fix what the administration sees as defects in the plan, which she said would hurt schools, teachers, clinics, public safety and working Californians.
According to the Associated Press, the original measure would apply to people living in California as of Jan. 1, 2026. Supporters say it is intended to raise $100 billion, with most of the money aimed at offsetting federal cuts to health care for low-income residents and some funding directed to food assistance and education.
Backers told Newsom in a letter that a one-time 2% tax on accumulated billionaire wealth would be modest and could help keep emergency rooms operating and protect patients, the Associated Press reported.
Measure has already qualified for voters
California Secretary of State Shirley Weber, a Democrat, said Wednesday that petitioners had submitted more than the roughly 875,000 signatures required to put the 5% version on the November ballot, according to the Associated Press.
The union’s 2% alternative would need to go through the Legislature because of a June 25 ballot-qualification deadline, the Associated Press reported. That leaves little room for a compromise unless lawmakers and Newsom agree to a separate plan.
The proposal has split Democrats and labor groups while drawing support from progressive figures, including Sen. Bernie Sanders of Vermont, according to the Associated Press. The debate follows major federal tax-cut and spending-cut legislation signed last year by President Donald Trump, which has prompted states to consider ways to replace lost funding.
Business groups and tech money line up against it
Opponents say the tax could prompt billionaires to leave California, reducing income tax collections from residents who already supply a large share of state revenue. The Associated Press reported that California relies on the top 1% of earners for nearly half of its personal income tax revenue.
The nonpartisan Legislative Analyst’s Office estimated that the 5% tax could bring in tens of billions of dollars during its first few years, but could later reduce annual income tax revenue by hundreds of millions of dollars, according to the Associated Press.
Google co-founder Sergey Brin has given $82 million to Building a Better California, a political committee supporting efforts to counter the billionaire tax proposal, the Associated Press reported. The committee has raised more than $118 million from fewer than a dozen donors, including Brin.
Other opponents include the California Medical Association and the California School Boards Association, which helped form a committee this week urging voters to reject the proposal if it appears on the November ballot, according to the Associated Press. Roger Salazar, a spokesperson for the anti-tax committee Golden State Promise, said the measure would be bad for small businesses and working families.
Newsom has opposed similar tax-the-rich ballot efforts before. In 2022, he came out against a measure to raise taxes on wealthy residents to fund electric vehicle incentives and charging infrastructure; voters rejected it, the Associated Press reported.
State lawmakers passed budget bills this week that seek revenue through other means, including extending a tax on health care providers. Senate President pro Tempore Monique Limón said the Legislature’s budget plan being discussed with Newsom does not include the billionaire tax and instead uses other revenues to address California’s long-term deficit, according to the Associated Press.
This story draws on original reporting from Fortune.