Newsom Opposes Billionaire Tax Proposal, Warns It Could Damage California’s Economy and Budget
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Governor Gavin Newsom has rejected Proposition 40, a one-time 5% wealth tax on California’s billionaires, saying the state should not risk driving away wealth and business. Supporters see it as a test of inequality politics, while analysts say the issue could matter for his potential 2028 presidential bid.
Governor Gavin Newsom said he opposes Proposition 40, a ballot measure that would levy a one-time 5% tax on the wealth of roughly 200 California billionaires to fund Medicaid shortfalls. He argued the tax should be enacted at the national level so California does not drive wealthy individuals and businesses out of the state, and warned it could hurt California’s budget and overall economic climate.
The proposal, backed by a healthcare union, aims to raise funds to replace deep federal cuts to Medicaid, which serves about 15 million Californians. Labor leader Lorena Gonzalez, president of the California Federation of Labor Unions, criticized officials who fear the billionaire class, saying they are “so afraid of this billionaire class.” Supporters frame the measure as a remedy for inequality, but opponents see it as another example of punishing success to solve budget problems.
Political analysts suggest Newsom’s opposition may be strategic. Saikat Chakrabarti, co-founder of the progressive think tank New Consensus, said the governor’s stance aligns with his anticipated 2028 presidential run, noting that he “needs those billionaires on his side.” Political science professor Fernando Guerra added that the governor’s position could help him appear more centrist to Democratic primary voters, suggesting the move is as much about politics as policy.
Supporters of the tax, including the California Teachers Association and other unions, argue the measure would address inequality. However, several high-profile California Democrats, such as former Vice President Kamala Harris and former House Speaker Nancy Pelosi, have remained silent, avoiding a politically charged fight.
Billionaire tech founders have publicly opposed the tax. Chris Larsen, who has donated over $12 million against Proposition 40, praised California’s tech sector on a KQED podcast, while Meta recently offered CEO Mark Zuckerberg a new class of non-voting shares to mitigate a potential tax bill. The “Yes on Prop. 40” campaign has launched TV and digital ads targeting Newsom in early presidential primary states, though it is outspent in California.
SEIU-UHW West president Dave Regan, the architect of the billionaire tax, described the debate as a “campaign problem” for Newsom rather than a healthcare issue, emphasizing the disconnect between the governor and the billionaire donors opposing the measure.