Josh Weiner
California’s Proposition 40, a one-time 5% tax targeting the state’s billionaires, has produced an unusually public rift within the Democratic Party ahead of its appearance on the November ballot, pitting labor-backed progressives against Governor Gavin Newsom himself.
The case for the measure centers on who benefited most from recent changes to federal tax policy. Supporters argue that billionaires captured the largest gains from federal tax reform and should now help offset cuts to federal healthcare funding, protecting hospitals and preserving access to care rather than shifting those costs onto working families. Proponents estimate the tax could raise roughly $100 billion in new revenue, a figure that already accounts for an expected 10% rate of avoidance and evasion.
The backing is substantial and organized. SEIU-UHW, the healthcare workers union, has put $31 million behind the campaign, and the measure has drawn support from national progressive figures including Vermont Senator Bernie Sanders, along with the California Democratic Party and AFSCME California, giving it institutional weight well beyond a typical ballot initiative.
Opposition, however, comes from inside the governor's own office. Newsom has argued the tax would trigger an exodus of wealthy company founders and investors, costing the state jobs and ultimately weakening its economy more than the new revenue would help. His preferred alternative is a tax imposed at the national level, reasoning that billionaires can't simply relocate to avoid a federal policy the way they could sidestep a state-specific one.
The measure has also drawn technical criticism that goes beyond the usual tax-policy to-and-fro. The Tax Foundation has flagged what it describes as aggressive design choices and possible drafting errors in the initiative's text, warning that the nominal 5% rate could end up dramatically higher in practice and could force company founders to sell a significant portion of their shares, potentially costing them controlling interests in the businesses they built.
Billionaires opposed to Prop 40 aren't relying on a no vote alone. Two companion measures, Propositions 41 and 42, are positioned to undercut the billionaire tax even if it passes, giving opponents a structural backstop against the initiative regardless of how the headline vote goes, a dynamic that has turned this single ballot question into a multi-measure fight playing out across several lines on the same ballot.
With Newsom publicly opposed to a measure backed by major unions and national progressive figures within his own party, Prop 40 has become as much a test of California Democratic coalition politics as it is a referendum on billionaire taxation itself, a split that voters will have to navigate directly when they reach the ballot in November.