Union softens on billionaire tax as Newsom pushes back
The labor union pushing California’s proposed tax on billionaires scaled back its plan a day after qualifying for the November ballot, but Gov. Gavin Newsom remains opposed.
The Service Employees International Union Healthcare Workers West originally sought a one-time 5% tax on individuals with a net worth over $1 billion. On Thursday, it offered to drop that rate to 2% if Newsom would support the measure. The revised proposal would need legislative approval to meet a June 25 deadline for ballot qualification, shifting the path forward from a voter-driven initiative. Tara Gallegos, speaking for the governor, reiterated that the adjustment does not resolve concerns about the measure’s design.
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A spokesperson for Newsom said the revised proposal doesn’t fix its “fundamental flaws that harm working Californians.” The governor argues the state-only tax would hurt funding for schools, clinics, and public safety, despite his general support for higher taxes on the wealthy.
The tax, if approved, would apply to residents as of Jan. 1, 2026, with an estimated $100 billion in revenue earmarked for healthcare, food assistance, and education. Supporters call the 2% rate a “modest” way to keep emergency rooms open. In a letter to Newsom, backers emphasized the urgency of the funding, framing the tax as a necessary counter to federal cuts that threaten healthcare access for low-income residents.
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Critics, including the California Medical Association and California School Boards Association, warn the tax could push wealthy residents out of state, shrinking long-term income tax revenue. The nonpartisan Legislative Analyst’s Office estimates the 5% version would raise tens of billions upfront but later cost the state hundreds of millions annually in lost taxes. California’s reliance on the top 1% of earners for nearly half its personal income tax revenue heightens concerns that an exodus of billionaires could destabilize state financing for critical services.
This week, state lawmakers advanced alternative revenue plans, including extending a tax on healthcare providers. Senate President pro Tempore Monique Limón said the budget under negotiation with Newsom doesn’t include the billionaire tax but addresses long-term deficits. The Legislature’s approved budget bills reflect a consensus between Newsom and lawmakers to pursue other revenue streams, such as the healthcare provider tax, to close structural gaps without targeting billionaires directly.
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Roger Salazar, a spokesperson for the opposition group Golden State Promise, called the measure “the wrong approach for California’s small businesses and working families.” The group argues that the tax’s unintended consequences would outweigh its benefits, particularly for middle-class residents dependent on state-funded services.
