Two ballot measures could block the wealth tax even if it passes
A mid-October Public Policy Institute of California survey found that 52% of likely voters would vote against Proposition 40 and 46% would vote for it. That was an apparent shift from an early-September PPIC survey, when 52% of likely voters said they would vote for the tax and 46% said they would vote against it. The results showed a close division among likely voters, who were slightly more likely to oppose the measure than support it before Tuesday’s vote.
A majority in favor would not settle the outcome. Proposition 40 would be blocked from taking effect if at least one of two measures designed to nullify it, also on this year’s ballot, passed and received more “yes” votes than the tax itself. The proposals, backed by the political action committee Building a Better California, include a ban on new taxes on financial assets and other personal property, a category that excludes real estate.
The “no” side has raised roughly 10 times as much as the “yes” side, helped in large part by technology moguls and venture capitalists who poured millions into a political action committee fighting the measure. Building a Better California has raised more than $333 million against Proposition 40, about 30% of it from Sergey Brin. Billionaires were already bracing for the measure’s approval, according to the Associated Press.
Some of those billionaires, including Google co-founders Sergey Brin and Larry Page, started cutting ties with California after the measure was unveiled. Mark Zuckerberg said he would stay in California for eight years and made a deal with Meta that would help him pay the tax without losing his ownership stake in the company.
Proposition 40 would impose a one-time 5% tax on the wealth of Californians whose net worth exceeds $1 billion, with most of the revenue dedicated to replacing federal funding cuts to health care. If voters adopt it, California would become the first state in the nation to tax the net worth of billionaires. The measure has triggered one of the most expensive ballot fights in California history.
Backers are led by the SEIU United Healthcare Workers West, which says the tax is needed to help California backfill federal funding cuts. The union estimates the state will lose $100 billion in federal health-care funding over five years. “It’s time to collect those taxes so we can ensure that our healthcare system is still safe,” said Lorena Gonzalez, president of the California Federation of Labor Unions.
Vermont Sen. Bernie Sanders has framed the proposal as “a monumental step toward reining in deep wealth inequality by ensuring the ultra-rich pay their fair share.”
Some traditional Democratic allies, including Planned Parenthood and the California Teachers Association, are part of a coalition opposing Proposition 40. The coalition is concerned about how the tax revenue would be divided and the potential impact on California’s budget if wealthy taxpayers leave in large numbers. California’s budget relies heavily on the income tax paid by the state’s richest residents.
Democratic Gov. Gavin Newsom has warned that the tax could prompt California’s wealthiest residents to move out of the state and take their tax money with them. Newsom says the measure would disadvantage California, but he supports a national minimum tax on anyone with a net worth above $100 million. Days before Sanders held rallies in California cities last month urging voters to support the state measure, Newsom told reporters that the senator’s focus on wealth inequality was “spot-on.” But he said that “on this issue, we fundamentally disagree.”
Robert Swonger, an auto glass technician living near Sacramento who is politically independent, said he planned to vote against Proposition 40. “Obviously, I would like billionaires not to have as much money as they do,” he said. “But I don’t believe taxing them out of existence is going to work.” Anthony Serrano, a Democrat living in Folsom who works for Kaiser Permanente, one of the nation’s largest not-for-profit health-care plans, was leaning toward voting for the tax because he tends to support “anything that is a positive for healthcare.”
Progressive politicians, including Sanders and Massachusetts Sen. Elizabeth Warren, have long supported a federal wealth tax. Gonzalez said the battle over Proposition 40 ignited a wider dialogue on the issue even if California rejected the tax. “We are taking a step forward, and we are showing other states that you can look them in the eye — you can look these billionaires in the eye — and take them on,” she said.