The thing draining California’s ability to fund its own schools isn’t the SEIU’s wealth tax. It’s a fiscal architecture that makes the state’s entire budget hostage to the stock portfolios of roughly two hundred people.
Will Swaim, writing in National Review, argues that California’s organized labor is defeating itself: the SEIU–United Healthcare Workers’ “2026 Billionaire Tax Act” is dying not at the hands of corporate opposition but from friendly fire — other unions, the California Teachers Association, and Governor Newsom all lining up against it. The piece catalogs the defectors, quotes Polymarket odds, cites a Hoover Institution projection that the tax would leave California $25 billion poorer after accounting for taxpayer flight, and frames the whole episode as labor’s collective refusal to shoot itself in the foot.
He’s right about one thing: capital is mobile, the flight threat is real, and the teachers have done their arithmetic correctly — under the current system, a poorly designed wealth tax that accelerates departure could genuinely gut schools. That concession stands.
But watch the trick. The piece presents the state’s vulnerability — its fiscal dependence on a tiny number of ultra-wealthy taxpayers — as an argument against taxing those taxpayers. It isn’t. It’s an argument against the dependence.
Here’s the mechanism. California’s top 1 percent pay nearly half the state’s income tax, and those incomes are overwhelmingly tied to capital gains — stock options, equity sales, investment returns. That means the state’s revenue in any given year rises and falls on how a few hundred people’s portfolios perform. In a good year the money pours in; in a bad year it evaporates. The Legislative Analyst’s Office has been warning about this volatility for years. It’s not a secret. It’s a feature of a tax system that chose to lean on a narrow base of spectacularly mobile, spectacularly volatile income. The same LAO the op-ed cites to show the top 1 percent’s share of income-tax revenue also warned last year that AI-related stock gains have pushed that share even higher — roughly 10 percent of all withholding, up from 6 percent three years ago. The concentration is accelerating. The vulnerability is deepening with it. The state is already running on a narrow, wobbling base, and the policy Swaim is mocking is an attempt to widen it.
Now strip away the op-ed’s framing and look at what it actually describes. A handful of billionaires can credibly threaten to leave — Spielberg to New York, Thiel to Miami, Page to Miami, Brin to Nevada, Sacks to Austin, Ellison already in Hawaii — and the mere rumor of departure is enough to reshape state policy. Newsom has killed legislative wealth tax proposals by merely signaling his disapproval. The CTA opposed the new initiative because education funding depends on 40 percent of the general fund, and if the billionaires walk, that money goes with them.
What the piece has documented, without quite meaning to, is a hostage situation. The state built its fiscal house on a foundation of two hundred people’s stock gains. Those two hundred people know it. And every time someone proposes asking them to pay more, the answer comes back: we’ll leave, and your schools will suffer.
Notice the timeline. Ellison decamped for Hawaii in 2012, as the piece admits in passing. The others left before the wealth-tax initiative was even a rumor. The state’s overconcentration of revenue predates the measure by decades. The billionaires the piece claims will flee the tax have been fleeing a state without one — which means the thing Swaim is blaming for the crisis is not the cause of the crisis. It’s a decoy. The structural problem — a tax base yoked to a handful of people’s stock portfolios — already exists, and the wealth tax is a response to it, not its origin.
Notice what has happened to the policy conversation in California. The state cannot raise taxes on the people most able to pay without their explicit permission. A proposal backed by 1.5 million signatures and two United States senators is being strangled not by a vote, not by a court, but by the credible threat that a few hundred people will move their primary residence to Miami. This is not a debate about whether billionaires deserve to be taxed. This is a demonstration that, the way the system is currently built, they cannot be — because the state literally cannot afford the departure of its own ruling class.
And what does California get for the privilege of this dependence? Nothing stable. Capital gains swing wildly. When the market is up, Sacramento is flush and everyone claims credit. When the market is down, there’s an $18 billion deficit and Medicaid cuts are on the table and advocates are rallying on the Capitol steps. That’s not fiscal health. That’s a weather vane bolted to a casino.
The Hoover Institution’s estimate — and it is an estimate, a model with specific assumptions about departure rates — is that the measure would leave California $25 billion poorer. That model does one thing and one thing only. It counts the cost of billionaire departure, but it does not count the cost of doing nothing: a state whose revenues convulse every time a few hundred stock options vest or don’t. It counts the billionaires who might leave and doesn’t count the 1.8 million low-income Californians who would lose coverage if the federal Medicaid cuts Swaim mentions are backfilled with nothing. That’s not a forecast. That’s a choice about what goes in the ledger and what stays out.
The op-ed never asks the structural question. It treats the system — a tax base so narrow that two hundred people’s stock options fund the schools of 39 million — as a law of nature. It isn’t. It’s a choice. California made it. California can unmake it.
Here is the move the piece makes that deserves the most scrutiny. It frames a structural fiscal crisis — a state too dependent on too few volatile taxpayers — as a labor story. The headline is about organized labor defeating itself. The body catalogues union-versus-union infighting. The subtext is satisfying: progressives eating their own, the left’s coalition fracturing under the weight of its own contradictions.
But the fracture isn’t a labor story. It’s a fiscal-design story. The teachers aren’t opposing the wealth tax because they’ve betrayed the working class. They’re opposing it because they’ve done the math and concluded that, under the current system, a tax that accelerates flight will hit their students first. The question isn’t whether they’re right about the math — under this system, they are. The question is whether this system — one in which public education’s funding depends on the continued residency and portfolio performance of two hundred people — is the system California should keep.
The piece never asks. It catalogues the chaos, quotes the Polymarket odds, and lets the reader conclude that the wealth tax was always impractical, that labor overreached, that cooler heads prevailed. What it buries is the sentence that matters: the reason a 1.5-million-signature initiative backed by a major union and two national leaders is dying is that a handful of people have effective veto power over the state’s fiscal policy, and the state built itself that way.
That’s not labor defeating itself. That’s the tax base defeating everyone who depends on it. And the people who depend on it most are not the billionaires who can move. They’re the teachers, the patients on Medi-Cal, the construction workers, and the families whose schools are constitutionally funded out of the same pot that rises and falls with stock prices. The op-ed treats their opposition to the wealth tax as wisdom. It’s actually desperation — the sound of people who know their funding is built on sand and are trying not to lose it in the next tide. The California Teachers Association isn’t defending billionaires. It’s defending a budget that is structurally addicted to the very concentration the tax tries to fix, and it’s afraid of the withdrawal. That’s a genuine bind. It is not an argument against fixing the structure. It’s a description of how deep the dependency goes.
The Polymarket odds Swaim leads with — 64 percent bet the measure won’t make the ballot — are a snapshot of a lobbying fight, not a verdict on the policy. A labor coalition fracturing over a tax bill is what democracy looks like when the stakes are high. The alternative — labor marching in lockstep because no one is allowed to notice that the revenue base is a house of cards — is not solidarity. It’s a Potemkin village. The piece treats the fracture as self-defeat. I’d treat it as proof that the conversation about who pays for California has finally gotten honest enough to be uncomfortable.
So build something better. Diversify the base. Tax what can’t leave. Stop making 39 million people’s public services depend on whether two hundred people feel like staying.
Land doesn’t move to Miami. You can relocate your residency, sell your portfolio, and park your capital gains in a Nevada trust — but the parcel of land in Palo Alto that doubled in value because the state built a transit line next to it? That land is still in Palo Alto. A tax on the unearned appreciation of land — the value created by public infrastructure, population growth, and community investment, not by anything the owner did — captures revenue from a base that is, by definition, immobile. The owner pays, or the owner sells to someone who will. Either way, the revenue stays in California.
This isn’t exotic policy. California voters nearly passed split-roll property tax reform in 2020 — Proposition 15 would have reassessed commercial and industrial property at market value, capturing billions in land appreciation currently shielded by Proposition 13. It failed by four points. The mechanism was sound; the political timing wasn’t. Adam Smith endorsed the principle. Milton Friedman called the land-value tax “the least bad tax.” Alaska runs a sovereign-wealth fund that mails a dividend to every resident from resource revenue. The tools for building a tax base that doesn’t flee when a billionaire gets a new zip code already exist. The obstacle is not economic. It’s political — and the op-ed’s framing is part of that obstacle.
Norway took its volatile resource revenue — oil, not stock options, but the same structural problem — and built a sovereign wealth fund that owns assets worldwide. The fund converts a narrow, volatile revenue stream — oil royalties, collected from a handful of extraction points — into a diversified pool of global assets that pays a steady annual dividend into the budget. California’s equivalent would convert a narrow, volatile capital-gains stream — collected from a few hundred stock-option holders — into a diversified, stable tax base: a land-value tax that can’t flee, a VAT that doesn’t care where your mailing address is, a wealth tax structured like Norway’s fund rather than like a one-time grab. Any of these breaks the dependency on the top 1 percent’s stock portfolios.
The alternative Swaim is defending is a state that lives or dies on the residency decisions of roughly two hundred people. That’s not fiscal conservatism. That’s a hostage situation, and the hostage is the general fund. The answer is broad-based taxation — land, consumption, or a permanent fund — that doesn’t care whether two hundred people stay or leave. California has the tools. The only thing standing between them and a tax system that doesn’t collapse when one bracket has a bad quarter is the political comfort of a state that has learned to live at the pleasure of its wealthiest residents.