The battle over a new tax on California’s billionaires is set to heat up in the coming months, as citizens debate whether the state should pressure its wealthiest to better serve its ordinary residents.
The proposed billionaire tax that sparked the storm is still a long way from voter approval or even a ballot measure, but the idea has already sparked a backlash from tech moguls — some of whom have already moved their bases out of the state.
Under the Billionaire Tax Act, California residents with more than $1 billion worth will pay a one-time tax of 5% on their total wealth. The measure will raise much-needed funds for health care, education and food assistance programs, said the Service Employees International Union-United Healthcare Workers of the West, the union behind the law.
Other unions mobilized billionaires, targeting the rich in Los Angeles.
A group of Los Angeles labor unions said Wednesday they are proposing a ballot measure to raise taxes on companies whose CEOs earn 50 times more than the average wages of their employees.
Here’s how this battle could go down in Golden State:
Who will be affected?
The California billionaire tax will apply to about 200 California billionaires residing in the state starting January 1. Nearly 90% of the money will go to health care and the rest to K-14 public education and government food assistance.
The tax, due in 2027, would exclude estates, pensions and retirement accounts, according to an analysis by the Legislative Analyst’s Office, a nonpartisan state agency. Billionaires can spread their tax payments over five years, but they will have to pay more.
Who are the billionaires already distancing themselves from California?
Google founders Larry Page and Sergey Brin
Google is still headquartered in California, but filings with the California Secretary of State in December show that other companies linked to Page and Brin have recently moved out of the state.
For example, one filing shows that one of the companies they run, now called T-Rex Holdings, moved from Palo Alto to Reno last month.
Business insider and New York Times I reported earlier about these filings. Google did not respond to a request for comment.
Palantir co-founder Peter Thiel
Los Angeles-based Thiel Capital announced last December that it had opened an office in Miami. The company did not respond to a request for comment. Thiel recently contributed $3 million to the California Business Roundtable political action committee, which opposes the ballot measure, records filed with the Secretary of State’s Office show.
Oracle co-founder and CTO Larry Ellison
Years before the wealth tax proposal, Ellison began withdrawing from California, but has continued to distance himself from the state since the proposal came about.
Last year, Ellison sold his San Francisco mansion for $45 million. The home at 2850 Broadway sold off the market in mid-December, according to Redfin.
Oracle declined to comment.
DoorDash co-founder and CTO Andy Fang
Fang, who was born and raised in California, said on Channel X that he loves the state but is considering moving.
“Stupid wealth tax proposals like this make it irresponsible for me not to plan to leave the state,” he said.
DoorDash did not respond to a request for comment.
What will it take for it to become law?
To qualify for the ballot, proponents of the proposal, led by the health care union, must collect nearly 875,000 signatures of registered voters and submit them to county election officials by June 24.
If placed on the November ballot, the proposal would be the subject of intense scrutiny and debate as both sides have already rigged big boxes to bombard voters with their positions. A majority of voters would have to approve the ballot to be held.
Lawyers for the billionaires also noted that the fight would not be over even if the ballot measure passed.
“Our clients are prepared to face a vigorous constitutional challenge if this measure advances,” Alex Spiro, an attorney who has represented billionaires like Elon Musk, wrote in a December letter to California Gov. Gavin Newsom.
What are the opportunities for initiative?
It’s unclear whether the ballot measure has a good chance of passing in November. Newsom opposes the tax, and his support has proven important in ballot measures.
In 2022, he opposed a ballot measure that would have supported the electric vehicle market by increasing taxes on Californians who earn more than $2 million a year. The measure failed. The following year, he opposed legislation that would tax assets exceeding $50 million. The bill was shelved before the Legislature could vote on it. A bill that would impose Annual tax Californians whose net worth exceeded $30 million in 2020 also failed.
However, Sen. Bernie Sanders (R-Vermont) and Rep. Ro Khanna (D-Fremont) supported the wealth tax proposal, and Californians have passed temporary tax measures before. In 2012, they approved Proposition 30 to increase the sales tax and personal income tax for residents with an annual income of more than $250,000.
Could it solve California’s problems?
The Legislative Analyst’s Office said: December letter The state would likely collect tens of billions of dollars from the wealth tax, but it could also lose other tax revenue.
“It is very difficult to predict the exact amount the state will raise for many reasons. For example, it is difficult to know what actions billionaires will take to reduce the amount of taxes they pay. Also, much wealth depends on stock prices, which are always changing,” the letter said.
California economist Kevin Claudine said the tax could create problems for the state’s budget in the future. “The important thing is that this is a one-time solution to a systemic problem,” he said.
Supporters of the proposal said the measure would raise about $100 billion and opposed the idea of billionaires fleeing.
“We’re seeing a lot of cheap talk from billionaires,” said Brian Galley, a law professor at the University of California, Berkeley, who helped write the proposal. “Some people do leave and change their behavior, but the vast majority of wealthy people don’t, because it doesn’t make sense.”
However, the decline is escalating.
Palo Alto-based venture capitalist Chamath Palihapitiya estimates that the revenue lost from billionaires who have already left the state will result in losses in tax revenue greater than those gained by the new tax.
“By starting this ill-conceived attempt at an asset tax, California’s budget deficit will explode. We still don’t know if the tax will get on the ballot,” he wrote on X.
The union that supports the initiative says that the “narrative of the exodus of billionaires” is “largely exaggerated.”
“Right now, it appears that the vast majority of billionaires have chosen to remain in California after the January 1 deadline,” said Susan Jimenez, chief of staff at SEIU-United Healthcare Workers West. “There is only a very small percentage left before the deadline, despite weeks of talk about Chicken Little claiming that a modest tax would trigger a mass exodus.”
Times staff writer Seema Mehta contributed to this report.