Billionaire Tax Sparks Intraparty War In California

SACRAMENTO, California — A proposed tax on billionaires is driving a wedge between Democrats in California, upending politics in this deep-blue state.

Gavin Newsom in recent days tore into the proposal, which had already drawn furious backlash from Silicon Valley heavyweights, including longstanding Democratic funders. And the blast radius is now expanding far beyond the governor, straining the state's powerful labor movement as some unions, though aligned on soaking the rich, question the tactics behind a ballot proposal that’s quickly become a national lightning rod.

“People are still at odds,” said Jim Mangia, the CEO of St. John’s Community Health, a politically active group of safety net clinics in South Los Angeles that initially supported the measure but has since pulled out to pursue its own local funding stream. “I think people are trying to navigate it without exploding into the public.”

Even some politicians who staked their political brands on challenging corporate power have reservations. Former Rep. Katie Porter, a leading candidate to succeed Newsom, is the latest high-profile Democrat to oppose the proposal.

Rarely does the mere filing of a ballot initiative scramble politics in California. But the tax proposal is suddenly dominating the discourse as proponents collect signatures to place it on the November ballot — and wealthy residents, like Google co-founders Larry Page and Sergey Brin, move their assets out of the state rather than wait to see if it will pass.

The idea of taxing billionaires’ total assets — a more novel idea than the type of income taxes California already levies on high earners — has long captivated the left, galvanizing labor and shaping presidential politics. But now that SEIU-UHW, a union representing more than 100,000 health care workers, has pushed the idea closer to reality than ever before, California is getting a vivid glimpse of just how politically explosive the proposal is and, for supporters, how high the stakes are for getting it right.

Unions broadly agree on the need to ease economic inequality by taxing the rich, and some have explicitly backed both the concept of a wealth tax and previous, failed California bills seeking to achieve it.

But some labor and progressive leaders fear the proposed tax on billionaires could distract from other pressing goals, including another union-backed tax measure benefiting schools and key congressional races to flip control of the House, and that it will close the door to future revenue bids.

Newsom, a leading 2028 contender, has denounced the measure as economically ruinous and vowed to stop it from becoming law, as Republicans like Florida Gov. Ron DeSantis eagerly work to hang the idea around Democrats' necks.

“The impacts are very real,” Newsom told POLITICO this week as he described an “all hands” effort to thwart the measure. “That’s not what we need right now, at a time of so much uncertainty. Quite the contrary.”

He and other critics have called the proposal unworkable and counterproductive, warning it will drive California’s tax base across state lines. The state’s independent legislative analyst concluded that the initiative — framed as a way to counteract the Trump administration’s tax and spending cuts with a one-time levy — could deprive the state of hundreds of millions of dollars in ongoing tax revenue.

“It’s one thing for a nation to come together and implement a policy like this. It’s much harder for states,” said Keely Bosler, who was California’s top fiscal official and recently produced a report, commissioned by labor unions, identifying flaws in the proposal. Bosler declined to name the specific unions.

Supporters of the tax on billionaires frame the intra-Democratic dispute as an illustration of whose side the party is on: wealthy denizens of blue pockets of privilege like Silicon Valley, who fill campaign coffers and stock California’s budget, or working-class people who have drifted away from the party and want to see their representatives fight for them. The leader of the California Labor Federation praised Rep. Ro Khanna’s “backbone and fortitude” for backing the initiative, though the group itself has not yet taken a formal position.

“Whatever debate’s happening, it’s not happening in workplaces among working people — it’s some esoteric, overthinking Democrats trying to be smarter than everyone,” said Unite Here Local 11 co-president Kurt Petersen, whose union is also pushing a tax on highly paid executives. “Did they not read the memo of what happened in the last election? People want us to do stuff, not just talk.”

The fight has also reignited a struggle over the Democratic Party’s economic agenda in the runup to the 2028 presidential contest, drawing vehement denunciations from Newsom and prominent Democratic donors like Reid Hoffman while being embraced by progressives like Khanna, who represents Silicon Valley and is also mulling a presidential run. Sen. Bernie Sanders called it “a model that should be emulated throughout the country.”

“This isn’t radical. This is fairly simple. We live in the wealthiest country in the world and people are struggling,” Liz Perlman, executive director of AFSCME 3299, said on a call this week in which unions and progressive groups from around the country trumpeted higher taxes in all 50 states.

But beyond Perlman, the unions on that call did not necessarily embrace a wealth tax. And even Democrats championing populist economic messages are treading cautiously on this particular wealth tax proposal.

California Sen. Adam Schiff, for example, signed onto a letter this week encouraging Democrats to “demonstrate a real willingness to take on corporate power and the billionaires” in advance of the midterms. But Schiff has not yet taken a position on the proposal roiling politics in his home state.

The debate around the UHW measure has been particularly thorny for the slew of Democrats aiming to succeed Newsom as California governor. A number have signaled openness to wealth tax proposals in the past, but they are aware that major unions in the state, whose endorsements they all covet, have significant worries about the proposal.

None of the eight major Democratic candidates have formally backed the measure, and three oppose it in addition to Porter: former Health Secretary Xavier Becerra, former Los Angeles Mayor Antonio Villaraigosa and former state lawmaker Ian Calderon.

Failure in the nation’s largest Democratic stronghold could be fatal for a movement to enact wealth taxes in other states or nationally. Opponents are counting on it.

“We have to make sure that we define this and communicate the flaws so effectively that nobody thinks they can go to other states and pass it,” said California Business Roundtable president Rob Lapsley, whose organization drew a $3 million donation from libertarian megadonor Peter Thiel to defeat the measure.

The seven-figure contribution before the measure has even qualified for the ballot is a preview of the gusher of cash that deep-pocketed opponents will likely unleash to quash the initiative. SEIU-UHW has put up just short of $1 million to cover the cost of collecting signatures, but going to war with billionaires will likely require major contributions from labor and progressive groups. So far, it’s unclear who would provide that funding.

Suzanne Jimenez, SEIU-UHW’s chief of staff, said in a statement that the union supported both a wealth tax and the separate measure to extend California’s existing income tax rate on top earners. The union plans to announce more labor supporters in the weeks ahead, she said, as it builds out a coalition.

“The labor movement across the country is united in support of ensuring billionaires pay their fair share — including so that working people can maintain access to healthcare, food assistance, and quality public education,” Jimenez said. “Labor is a democracy — and it’s normal for there to be internal discussions about strategy, but in the end, labor will stand united to pass this reasonable, one-time emergency tax on billionaires to keep hospitals and emergency rooms open.”

Supporters argue that fears of capital flight are overblown and that the one-time windfall will far outweigh the losses. But for some in organized labor, wariness about the proposal extends beyond its financial implications.

Much of the consternation revolves around the tactics of the health care union’s leader, Dave Regan, who opted to press forward even after a discussion last year with a dozen-plus SEIU member unions in which his group was the only one to express support, according to people familiar with the discussion who were granted anonymity to speak candidly.

“When things are so big they deserve robust discussions, and true to form, Dave Regan went ahead,” said one of the people familiar with labor discussions. “There’s strategic decisions here that with other voices may have produced a different product.”

A spokesperson for SEIU California, the umbrella group of 17 affiliated locals, declined to comment.

Critical union officials have griped that the measure overwhelmingly benefits SEIU-UHW’s members at the expense of other public sector employees. More broadly, they fear the wealth tax proposal could do more harm than good by dragging down a parallel initiative that would make a higher income tax permanent — viewed as indispensable by public employee unions — and potentially making it harder to pass something down the line.

“The problem is that they’re doing it in a really myopic way,” said a union official. “When you do that, it creates a schism.”

But SEIU-UHW leaders insist they are headed to the ballot, brushing aside Newsom’s effort to back them off. That would make California ground zero for one of the most far-reaching taxes ever considered.

“I do think it is, worldwide, the most promising proposal for taxing the ultra-rich, the one that has the biggest chance of passage,” said UC Berkeley economist Emmanuel Saez, who helped construct the measure. “That’s why direct democracy, the people voting, is perhaps its best chance. And it’s going to be a very fierce debate.”

Rachel Bluth, Dustin Gardiner and Blake Jones contributed to this report.