The fiery debate about a proposed ballot measure to tax California’s billionaires has sparked some soul-searching across the state.
While the idea of a one-time tax on more than 200 people has a long way to go before getting onto the ballot and would need to be passed by voters in November, the tempest around it captures the zeitgeist of angst and anger at the core of California. Silicon Valley is minting new millionaires while millions of the state’s residents face the loss of healthcare coverage and struggle with inflation.
Supporters of the proposed billionaire tax say it is one of the few ways the state can provide healthcare for its most vulnerable. Opponents warn it would squash the innovation that has made the state rich and prompt an exodus of wealthy entrepreneurs from the state.
The controversial measure is already creating fractures among powerful Democrats who enjoy tremendous sway in California. Progressive icon Sen. Bernie Sanders (I-Vt.) quickly endorsed the billionaire tax, while Gov. Gavin Newsom denounced it .
The Golden State’s rich residents say they are tired of feeling targeted. Their success has not only created unimaginable wealth but also jobs and better lives for Californians, they say, yet they feel they are being punished.
“California politics forces together some of the richest areas of America with some of the poorest, often separated by just a freeway,” said Thad Kousser, a political science professor at UC San Diego. “The impulse to force those with extreme wealth to share their riches is only natural, but often runs into the reality of our anti-tax traditions as well as modern concerns about stifling entrepreneurship or driving job creation out of the state.”
The state budget in California is already largely dependent on income taxes paid by its highest earners. Because of that, revenues are prone to volatility, hinging on capital gains from investments, bonuses to executives and windfalls from new stock offerings, and are notoriously difficult for the state to predict.
The tax proposal would cost the state’s richest residents about $100 billion if a majority of voters support it on the November ballot.
Supporters say the revenue is needed to backfill the massive federal funding cuts to healthcare that President Trump signed this summer. The California Budget & Policy Center estimates that as many as 3.4 million Californians could lose Medi-Cal coverage, rural hospitals could shutter and other healthcare services would be slashed unless a new funding source is found.
On social media, some wealthy Californians who oppose the wealth tax faced off against Democratic politicians and labor unions.
An increasing number of companies and investors have decided it isn’t worth the hassle to be in the state and are taking their companies and their homes to other states with lower taxes and less regulation.
“I promise you this will be the final straw,” Jessie Powell, co-founder of the Bay Area-based crypto exchange platform Kraken,