Newsom backs Prop. 42 barring new California wealth taxes

State Democratic Party endorsed billionaire tax in August

California Gov. Gavin Newsom backed Proposition 42 on Friday, an antitax ballot measure that could invalidate the separate proposal to tax billionaires’ wealth. Newsom announced the endorsement through the campaign backing the measure. “Californians deserve to have their retirement and life savings protected from new state taxes,” Newsom said in a statement.

Newsom has long opposed the high-profile measure that would tax billionaires’ wealth. He came out against the tax last year, weeks after it was proposed by a healthcare-workers’ union, and has argued the levy could push the state’s largest taxpayers to flee.

The proposed wealth tax is novel in the U.S. Unlike the income taxes that most Americans pay, it would apply to the net worth of California residents with net assets of $1 billion or more. The measure is aimed at offsetting steep cuts to Medicaid funding that President Trump signed into law last year.

Voters are set to decide on both ballot measures Nov. 3.

Prop. 42 could invalidate the billionaire tax by changing California’s constitution to prohibit new taxes on financial assets or personal property, other than real estate. A likely legal battle looms if voters approve the measure and the wealth tax.

The wealth tax has exposed bitter divisions in the Democratic Party and in California’s labor movement. The state Democratic Party voted in August to endorse the measure. The California Democratic Party and several large unions oppose Prop. 42.

Prop. 42 has raised tens of millions of dollars from a political committee funded in part by billionaires including Google co-founder Sergey Brin. The effort took off after the healthcare-workers’ union proposed the wealth tax. California billionaires have poured money this year into campaigns claiming the wealth tax could weaken the state’s fiscal base or be expanded by the legislature to apply to a broader swath of residents.

The union backing the billionaire tax effort — the Service Employees International Union-United Healthcare Workers West — said Newsom was siding with California’s wealthiest residents over healthcare for children and families. “Governor Newsom is in lock step with his billionaire-backers,” Debru Carthan, the union’s vice president, said in a statement.