Newsom, billionaires face costly battle as California wealth tax advances

Governor Gavin Newsom is calling for a federal tax on billionaires after failing to stop a California wealth tax from reaching the November ballot, setting up a high-profile test of whether voters will back one of the nation's most aggressive efforts to tax the rich.

Newsom, who is considering a presidential run in 2028, said on Friday that he stands against the California measure, arguing that taxing billionaires should be done nationally rather than state by state. He instead called for a federal tax on billionaires and those worth more than $100 million, changes to inheritance rules and closing tax loopholes on wealthy people borrowing against their assets, in a lengthy Substack post.

Newsom didn't propose a rate for a federal wealth tax or outline how it would work, including what exactly would be taxed. He also proposed creating a public equity fund that would take a stake in the artificial intelligence economy, though again he offered few details.

"It is time for a national billionaires' tax," Newsom said. "The fight belongs at the federal level, where this broken system was created in the first place."

The governor, billionaires and progressive groups tried persuading the union, SEIU-UHW, to withdraw the measure before Thursday evening's deadline, but failed to reach a deal.

Newsom had even privately expressed assurances about an agreement, telling a wealthy donor he expected to negotiate the measure off the ballot, Bloomberg News previously reported.

"We had a couple of cursory conversations with the governor, but they made it clear they were not going to entertain anything that affected billionaires and we just think that's wrong," said Dave Regan, SEIU-UHW's president at a press conference late Thursday.

The decision sets up a costly showdown at the November general election, with some of the world's richest people willing to spend millions of dollars to stop the tax.

The wealth tax will face a deep-pocketed and growing opposition campaign not just from billionaires and Newsom but also from other Democratic-aligned groups, including the California chapter of Planned Parenthood and other unions. A group linked to billionaire Sergey Brin is bankrolling other ballot measures that could nullify the wealth tax if one of them receives more votes. The anti-wealth tax measures will also be put before voters in November.

"We are ready to defeat this convoluted nightmare of a measure in November," said a spokesperson for Golden State Promise, a group backed by billionaire Chris Larsen, in a statement. Another coalition opposing the measure that includes the California Medical Association and the California School Boards Association said it "directly threatens vital funding for education and schools, healthcare and clinics, public safety, and infrastructure projects."

The levy will also gauge the broader voter appetite for taxing extreme wealth.

A May poll from Public Policy Institute for California found the tax is supported by 54% of likely voters. More recently, San Francisco voters rejected a proposal to increase taxes on large businesses with highly-paid CEOs.

Vermont Senator Bernie Sanders and Silicon Valley Representative Ro Khanna support the measure, with Khanna saying Elon Musk's status as the world's first trillionaire underscores the need to tax the rich. Both have also proposed a federal tax, which has little chance of passing in the Trump administration.

"If you're opposed to this tax, you're on the side of trickle-down economics," Khanna said, calling concerns about capital flight from the state "hogwash." "You're protecting the very, very rich as opposed to standing up for the working class."

The tax was first floated in October as a way to backfill federal cuts to healthcare funding. The idea was to levy a one-time 5% tax on a billionaire's net worth, from their art collection to company stock, raising as much as $100 billion.

The proposal rattled California politics and led some of the state's wealthiest residents to say they were departing. Google co-founder Brin, the world's third richest person, has so far spent more than $80 million to fund a group that's supporting the anti-wealth tax ballot measures — after moving to Nevada. 

Last week, the group proposing the measure tried pushing for a compromise by lowering the tax rate on billionaires from 5% to 2%. Newsom immediately rejected the offer.

"Ironically Governor Newsom is in lockstep with Donald Trump and billionaire like Peter Thiel and Sergey Brin on this issue," Carthan said. "Governor Newsom has had seven months to put forward a solution to prevent hospitals from closing and save patient lives. But he hasn't, because Governor Newsom has no plan."

Tech billionaires are particularly concerned about a provision of the wealth tax they say would allow the state to value their net worth based on the voting control percentage of a company, rather than their actual economic stake. That would potentially raise how much tax they have to pay and could force them to divest even further in order to raise cash. The authors of the proposal dispute that interpretation.