‘what A Waste’: How California’s Billionaire Tax Campaign Fell Apart

SACRAMENTO, California — As Democrats notch their biggest gains in decades, a landmark tax on California billionaires appears headed for defeat. It is a notable outlier as progressives elsewhere rode populist fervor to victory — and the campaign may have been undone as much by its backers’ own missteps as by opponents spending more than $300 million.

Long before the billionaire opposition formed, labor union leaders were deeply divided over the ballot proposal. The measure directed nearly all its revenue to health care, and its sponsor pushed ahead without broad consensus. Those rifts cost the campaign key endorsements, left it without enough moneyto mount a serious response and allowed billionaire opponents to magnify and exploit disagreements among groups that generally support taxing the rich.

“What a waste,” said Jim Mangia, the president of a health clinic chain who supports Proposition 40 and has worked with Dave Regan, the main labor leader behind it, in the past. “What a waste of resources and what a squandering of an opportunity. There was no coalition, they pissed off everyone, and so many of those natural allies that would’ve supported it refused.”

Sen. Bernie Sanders called Prop 40, which would have imposed the nation’s first-ever wealth tax, the most important ballot initiative in America. It tested whether populist anger over rising income inequality could translate into policy, serve as a model for similar efforts elsewhere, and demonstrate that the appetite for wealth taxes can overcome boundless resources. Its likely defeat may instead send a warning that a tax-the-rich message can falter even in deep-blue territory when Democratic leaders are divided.

Proponents didn’t wait for polls to close to fault a gusher of opposition money for the likely outcome. At a Tuesday night press conference, Regan vowed to continue fighting to check the power of billionaires, suggesting he could return to the ballot in 2028.

“If they manage to get away with this this time, it only shows one thing,” Regan said: that hundreds of millions of dollars “can produce a lot of confusion and a lot of second-guessing among people who really, in their hearts, know what the right thing to do is.”

The Associated Press has yet to call the race, but even proponents have acknowledged their imminent loss. In a since-deleted X post, the union sponsoring the measure said Wednesday that the measure “appears unlikely to pass.”

And some of the initiative’s staunchest advocates conceded that resistance from officials like Gov. Gavin Newsom, who has consistently opposed state-level wealth taxes, and from unions representing teachers and firefighters left the campaign facing a much steeper climb.

“Any time labor gets split at all and any time establishment Democrats break away, it makes it harder to really implement a working class agenda,” said California Labor Federation President Lorena Gonzalez, who supported Prop 40. “Every union, no matter where they are, has voiced to me that they think billionaires should pay their fair share …You’d think that if you have a common value, in a perfect world you could find a way to do it.”

The runup

Before the wealth tax measure blew everything up, a group of statewide unions commonly referred to as “the alliance” had met for years to lay out a long-term ballot strategy for raising tax revenue. In the spring of last year, they settled on their priority for 2026: an initiative to make permanent a high income tax on affluent Californians to fund public education, which would become Proposition 3. A bid for additional dollars would have to wait.

But that summer, President Donald Trump signed his “big beautiful bill” that slashed health care spending, raising the specter of widespread job losses and hospital closures. Months later, Regan, leader of the health care workers’ union SEIU-UHW, turned to a familiar tactic: He filed a ballot initiative.

Regan has faced criticism over the years for using ballot initiatives as leverage to force negotiations. But he insisted that the scale of the coming health care crisis demanded bold action, and he argued his union brethren had no plan to avert the worst.

“We see this freight train coming at us. There's no way to reroute the freight train,” Regan said in an interview earlier this year, and “there is no other solution on the board.”

Regan’s decision hit Sacramento like an earthquake in a wine shop. The measure would create a special fund whose funding was devoted almost entirely to health insurance, providers, and facilities, angering other unions — teachers in particular — who felt their own priorities had been ignored.

Another source of enormous frustration was that Regan had barreled ahead with a politically perilous project without building the type of coalition required to take on such a formidable task.

When labor and progressive groups pursued a landmark property tax increase in 2020, they spent years cultivating support and assembling a team that included leading unions and a reluctant Newsom — and still fell short. Regan, by contrast, did not have consensus even within SEIU State Council, the 17-member umbrella group that includes SEIU-UHW. Now he was imperiling labor’s carefully laid plans.

“Prop 3 had already been started, signatures were being collected, and Dave Regan didn't give a shit — he did what he was going to do and he expected people to fall in line, and that’s not how it went,” said Gale Kaufman, a longtime strategist for the California Teachers Association, which ultimately opposed Prop 40. “The billionaire tax as an issue is obviously popular with voters — but that doesn't mean any billionaire tax is going to win.”

The foes

No one had to guess where Newsom would stand. An economic moderate by the standards of Democratic-dominated Sacramento, the governor had decisively repudiated wealth tax bills that bubbled up in the Legislature. He called them fundamentally unworkable threats to California’s budget, which relies heavily on a sliver of ultra-wealthy taxpayers.

“There’s no state-only version of a wealth tax that I can imagine him being okay with,” said Nathan Barankin, Newsom’s chief of staff. “If you do a state-only version, it creates economic incentives for money and jobs to leave the state.”

Newsom and his staff quietly sought to dissuade Regan in the weeks after he filed the measure. When he proved immoveable, the governor began publicly assailing the tax.

As the governor was becoming the face of the Democratic opposition, some of California’s wealthiest people were making their own plans to fight it. The wealth tax activated a coterie of billionaires who not only shared Newsom’s fears about the economic consequences — many of them saw the measure as an attack on Silicon Valley and a personal affront that punished them for their success.

“What I hear from no shortage of them is a feeling of ‘I’ve been successful…and now some guy in Sacramento is acting like I’ve done something illicit and I’m the public enemy now,” said Mike Murphy, a consultant whose clients have included wealth tax foes. “There has been a compounding where they’re all like: this is horrible, it’s double-horrible, we have to do something.”

A group led by Google co-founder Sergey Brin, a longtime personal acquaintance of Newsom who had formerly been disengaged from California politics, hired premiere political talent and poured tens of millions of dollars into a new political group that funded multiple ballot initiatives designed to counteract the wealth tax. They hoped they could help Newsom convince Regan to drop his initiative.

“Our job is to get Gavin to negotiate this so it doesn't get to the ballot,” investor and longtime Newsom ally Ron Conway told a podcast in March.

As a June deadline for pulling ballot measures approached, Newsom ramped up the pressure on Regan by urging prominent unions and health care groups to openly oppose the measure.

They needed little encouragement. Many of them argued the initiative had been flawed from the start, pointing to an official state analysis that found it would cost California money over the long run and potential fiscal challenges stemming from its one-time structure and a lack of specificity around how funding would be spent.

“Once you get into the particulars, if you’re a responsible person in health care you can’t support this,” said California Medical Association President Dustin Corcoran. “That’s why you build coalitions and spend time parsing things.”

But the internal resistance to Prop 40 went beyond the policy details. Regan had alienated many in Sacramento with his combative style and his union’s ballot measures targeting the health care industry. Initiatives to limit hospital executive pay and regulate clinics — including one such measure on the same ballot — angered health care players who otherwise shared his concern about coming federal cuts.

Those tensions soon exploded into public view. The California Primary Care Association filed a federal lawsuit accusing Regan of offering to drop the clinic initiative if the group supported the wealth tax. Fellow SEIU leaders filed formal charges accusing Regan of threatening people as he sought their endorsements for the wealth tax; an outside investigation later substantiated those complaints. Regan has strenuously denied both sets of allegations.

Ultimately, Newsom’s push to have Regan stand down didn’t work. But the contours of the governor’s coming opposition campaign were clear: Billionaires would supply the money. Democratic allies like Planned Parenthood and unions would supply the credibility.

It would prove to be a lethal combination.

The campaign — and the aftermath

Regan and his allies insisted they knew from the start that they’d be outspent. But the mismatch was staggering: Deep-pocketed opponents spent well over $300 million. The yes campaign — almost entirely supported by SEIU-UHW — put most of its funds into gathering signatures to qualify the measure, otherwise spending just $16 million through late October.

Without the resources to mount much of an advertising campaign — an enormously expensive proposition in California — the yes side was unable to counter a tsunami of negative advertising. When it did launch small-scale, targeted campaigns, its strategy took an unusual turn: One spot targeted a specific Planned Parenthood leader. Another spot lambasted Newsom — in other states.

The yes side did have assets. It brought Sanders to California for raucous rallies. Key endorsements from the California Democratic Party and the California Labor Federation undercut the narrative that Democrats were unified against the measure, as did endorsements from individual unions — San Diego construction workers, Los Angeles teachers — who broke from their statewide groups. The California Federation of Teachers, the union that has advocated for wealth taxes the longest, flipped from neutral to support.

It wasn’t enough. Negative advertising appealed to economic anxiety and distrust of government, warning — misleadingly, proponents said — that the Legislature would widen the scope of the tax to cover more than just billionaires. And widely disseminated pushback from trusted Democratic messengers helped drive down support in a state where taxing the rich is a broadly popular idea.

“The split made the difference,” said Fred Glass, a former California Federation of Teachers official who now co-chairs a tax-the-rich group for the California DSA. “Many people who should know better (were) confused and it’s precisely because of the billionaire money behind CTA and the Building Trades and Planned Parenthood.”

The measure’s standing in the polls steadily eroded as the bombardment continued. By the time ballots went out in mid-October, multiple public surveys showed opposition to the measure overtaking support. As of Thursday morning, it lagged by double digits.

Labor and health care groups that opposed Prop 40 said they would continue to pursue revenue measures — including, potentially, another wealth tax.

“I 100% think this is not the end of this type of effort, and there is a world where labor unites around a wealth tax proposal,” said Kristina Bas Hamilton, senior director of external affairs for United Domestic Workers/AFSCME Local 3930. “I think the conditions weren’t there.”

But the terrain could become even more hostile. Proposition 42, another billionaire-funded measure, would bar future wealth taxes unless voters amend the state’s constitution — a significantly more expensive and difficult hurdle. The measure was leading by a broad margin Thursday afternoon.

“Whatever we do, however well we do it, it’s going to meet with an incredible force of opposition that all that money and power can buy,” said Daniel Zingale, a veteran of California politics who backed the measure but did not work for the campaign. “Their opposition is not about flaws in the coalition or flaws in the initiative, their opposition is about not wanting to share their enormous and growing wealth.”

And wealthy Californians who were incensed by the wealth tax backed candidates across the ballot, often against labor-supported Democrats, and built an operation that could shape future elections — and policies in deep-blue Sacramento.

“In the future, it would be important for the kinds of problems that labor leadership allowed to happen here not to happen,” Glass said. “The central lesson of labor history is if we allow ourselves to be divided, we lose.”