California voters will decide in November whether to impose a single tax of 5% on billionaires in a ballot measure that supporters say could raise about $100 billion to help offset cuts in federal Medicaid funding, despite opposition from Gov. Gavin Newsom and other state leaders.
The proposal would apply to California residents whose net worth exceeds $1 billion as of January 1, 2026. Under the initiative, approximately 90% of revenue would be directed to health care programs, with the remaining 10% set aside for health care programs. education and food aid.
Supporters of the measure, which they called a “billionaire tax,” celebrated this week after qualifying for the November ballot, arguing the proposal would help keep hospitals and emergency rooms open as long as possible. California is grappling with reductions in federal health care funding.
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California voters will consider a ballot measure in November that would temporarily raise taxes on billionaires. (Patrick T. Fallon / AFP via Getty Images / Getty Images)
Newsom, however, argued that the proposal is a short-term solution to a long-term budget challenge that could drive wealthy taxpayers out of the state and further destabilize California’s tax base. Democratic gubernatorial candidate Xavier Becerra and Republican candidate Steve Hilton also expressed opposition.
A coalition of health care, education and housing organizations also warned that the proposal could make California’s finances more volatile by encouraging high-income residents to leave.
The proposal would impose a one-time 5% tax on people with a net worth of more than $1 billion living in the state as of Jan. 1, 2026. (Mario Tama/Getty Images/Getty Images)
The nonpartisan Legislative Analyst’s Office estimates the measure would generate tens of billions of dollars in its first few years, although it projects that California’s personal income tax revenue will then decline by hundreds of millions of dollars a year as taxpayers adjust their behavior.
California already relies heavily on its top earners, with the state’s top 1 percent of taxpayers accounting for nearly half of all personal income tax revenue.
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The initiative includes several provisions intended to address concerns about how billionaires would pay the tax. Eligible taxpayers could choose to pay their debt in five annual installments, while some people with largely illiquid assets could benefit from a deferral mechanism established under the proposal. The measure also contains anti-avoidance provisions intended to prevent taxpayers from transferring assets or restructuring ownership to reduce their tax liability.
Gov. Gavin Newsom and many other traditional union allies are opposed to the measure. (Justin Sullivan/Getty Images/Getty Images)
Opponents argue that many Silicon Valley billionaires have already moved their assets or threatened to leave California to avoid future tax increases.
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The union supporting the proposal, Service Employees International Union-United Healthcare Workers West, had previously proposed reducing the tax rate to 2% in an effort to win Newsom’s support. According to CBS News, the governor’s office said the interest rate cut does not change his opposition.