Wealth-tax backers float 2028 push as Wyden's federal bill gains co-sponsors

Saez expects a broader coalition behind a lower 1% annual levy

Proponents of a California wealth tax have already floated putting another levy on the state’s ballot in 2028, saying they have learned important lessons from this year’s unsuccessful attempt to marshal voter support for a tax on billionaires. The effort survived the defeat of Proposition 40, a one-time 5% tax on billionaires’ net assets pitched by a healthcare union, which California voters rejected according to the Associated Press. The AP called the race late Monday as “no” votes were ahead by about 5.5 points. The initiative would have been the first tax of its kind in the United States, where stocks, intellectual property and other holdings have long been allowed to grow in value without being taxed unless they are sold.

Emmanuel Saez, a University of California, Berkeley, economist who helped draft the tax proposal, said he is already back at work looking for a possible path forward. At the state level, he expects a future effort to build a broader coalition — rather than a single union — and to propose an annual tax at a lower rate of, say, 1%. “My view is that it’s still a positive, on net, for the agenda just because it attracted so much interest,” Saez said.

In Washington, Sen. Ron Wyden of Oregon, who is in line to chair the Senate Finance Committee next year, has repeatedly proposed legislation in recent years that would impose a 23.8% annual tax on billionaires’ unrealized capital gains. Each time he introduces the bill, it attracts more co-sponsors — a sign Democrats are getting less squeamish about the idea, a staffer said. Wyden said the measure responds in part to the ballooning U.S. budget deficit. “Congress will not be able to fix the budget and pass a bold, progressive agenda without taking new steps to ensure billionaires pay a fair share,” Wyden said in a statement. Rep. Rosa DeLauro of Connecticut, who is positioned to lead the House Appropriations Committee, said last week that “we should look at a wealth tax” to fund universal healthcare.

The defeat came even as the Democratic Party, which broadly favors tax increases to fill budget holes, reduce wealth disparities and fund progressive priorities, posted big wins in statehouses and gained control of the U.S. House and Senate. Some tax supporters saw a silver lining in the failure: the measure came close even after wealthy opponents outspent proponents 10 to 1 in a heated campaign, and backers vowed to keep up the fight. Billionaires including Google co-founder Sergey Brin, venture capitalist John Doerr and Stripe co-founder Patrick Collison spent hundreds of millions of dollars to defeat it.

Opponents included California Gov. Gavin Newsom and his newly elected successor, Xavier Becerra, both Democrats who warned the proposal could drive off wealthy taxpayers. The tax’s failure stood out in an election that produced big Democratic wins across the country, including in California.

Rob Lapsley, president of the California Business Roundtable, which worked to defeat the tax, said the result should serve as a warning elsewhere. “This sends a crystal-clear message to the rest of the U.S. that you should not put a wealth tax on the ballot in any state across the country,” Lapsley said. “If it’s not going to pass in California, most likely it’s not going to pass anywhere else.”

A billionaire-funded countermeasure that would effectively ban wealth taxes was, as of Tuesday, holding on to a slim majority of “yes” votes. Future attempts to tax wealth in California could be complicated if that measure ends up passing.

Supporters of the wealth-tax idea — including progressive leaders such as Sanders, academics and unions — argue that existing laws allow ultrarich Americans to pay little tax relative to their wealth. They say billionaires’ ability to amass vast fortunes and donate unlimited sums to political groups poses a threat to U.S. democracy and meritocracy. In California, the fact that nine-tenths of expected revenue was earmarked for healthcare divided labor unions whose members would not directly benefit.

Vermont Sen. Bernie Sanders said Tuesday in a social-media post that “I’ve got bad news for these Oligarchs” and “Your victory is fleeting. We will pass a federal billionaire wealth tax & end your greed.”

Proponents of taxing the rich more have strung together some other wins in recent years. Colorado voters last week repealed a provision in the state constitution that required the same income-tax rate for everyone and imposed six new tax brackets. Washington state voters rejected an effort to overturn a 9.9% flat tax on income over $1 million that state lawmakers approved earlier this year.

Democrats’ state-level gains on Nov. 3 mean they will hold trifectas — control of both legislative chambers and the governor’s office — in 22 states come January, up from 16 currently, following wins in Arizona, Michigan, Minnesota, Pennsylvania, Nevada and Wisconsin. Support for taxing the wealthy can also be found in some unlikely areas, polls commissioned earlier this year by John Thomas, a Republican strategist, suggest: he found that a hypothetical wealth tax on billionaires was almost as popular in Texas and Florida as in New York and California.

In the near term, Democrats have little ability to move tax policy in Washington: any legislation to raise federal taxes on billionaires is likely to run into President Trump’s veto during his remaining two years in office. Still, control of Congress comes with a brighter spotlight. Federal wealth-tax efforts foundered during the Biden administration, when Democrats’ razor-thin margin in the Senate required unanimity to pass legislation along party lines. With a larger majority in the Senate next year and possibly a Democrat in the White House two years later, major tax increases could have an easier path.

The concept also faces potential legal hurdles. The Constitution imposes complicated and unresolved requirements around “direct taxes,” a term without a clear definition but one that some scholars believe could undercut wealth taxes. The 16th Amendment was ratified to allow income taxes despite those requirements, but it might not enable levies on wealth.