Billionaire tax divides California Democrats

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California voters this midterm cycle will decide whether the state will impose a wealth tax on billionaire residents, as wealthy Californians organize against the measure and experts say its potential broader impact on the state’s economy is nuanced.

By voting “yes” on proposition 40, Californians would support a one-time 5 percent tax on billionaires’ wealth. The government revenue from the wealth tax, which no state to date has imposed, would primarily go towards state healthcare programs, with the remainder earmarked for food assistance and education initiatives.

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But polling indicates it is unclear the measure will receive the simple majority support needed to pass. Even if it does, questions remain about next steps for the state and downstream effects.

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Wilkinson, whose organization supports proposition 40, added the 5 percent billionaire tax “would provide critical resources to help California” grapple with the federal funding cuts.

The measure, however, has not quite unified Democrats in the state. While the state Democratic Party and AFL-CIO and Teamsters unions support proposition 40, California Gov. Gavin Newsom (D) is against it.

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Gordon, a California native, noted “some types” of wealthy individuals move in response to taxes, citing research that shows entrepreneurs and scientists decide where to live based on tax policy.

Such a development in California, she argued, would be “concerning” for the state government, which relies on those individuals for revenue in the form of income taxes.

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Analysts from the nonpartisan California Budget and Policy Center noted in August there will “likely” be legal challenges to the levy, specifically regarding the provision stating the tax would apply to billionaires who were California residents on Jan. 1 of this year

“Because a wealth tax is untested at a state level in the United States, it carries real uncertainty: courts may strike down the measure or portions of it, conflicting measures could lead to years of litigation, and no one can say how the location decisions of billionaires might change and what that would mean for California’s long-term finances,” the analysis added.

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