The Political Calculus Behind Newsom’s Opposition to California’s Billionaire Tax
To hear Gov. Gavin Newsom talk about billionaires and inequality, you’d think he would be squarely behind a proposal on California’s November ballot that would levy a wealth tax on the richest Californians to help pay for healthcare.
In a video posted to his Substack and YouTube channel in June, Newsom argued that the country’s tax system is “fundamentally broken.”
“Think about this: Just 10% of the people, 10% of the people in the country, own two-thirds of the wealth. A 30-year-old, for the first time in American history, is not doing better than his or her parents. That’s a five-alarm fire,” he said. “It’s time for an economic reset, a true minimum tax. A true minimum tax on billionaires that ensures the people at the very top pay at least the tax rate their own workers pay.”
But like many high-profile Democrats and some of their strongest allies in this deep blue state, the governor is opposed to Proposition 40.
The ballot measure, proposed by a healthcare union, would impose a one-time, 5% tax on the overall wealth of the state’s approximately 200 billionaires. The money would be used to backfill deep federal budget cuts to Medicaid, which provides health insurance to low-income Americans — including nearly 15 million Californians.
Newsom has argued Proposition 40 is bad for California. He said this kind of tax should be imposed on the national level, so billionaires won’t just pack up and leave the state. And he insisted that the tax will ultimately hurt the state’s budget more than it will help, by chasing wealthy entrepreneurs and their businesses to other states with lower tax burdens.
Some progressives think the governor — who is eyeing a possible 2028 presidential run — is just wary of angering a donor class with deep pockets. Tech industry billionaires like Chris Larsen, Elon Musk and Marc Andreessen have become increasingly involved in funding campaigns in recent years.
“There are a lot of elected officials who are so afraid of this billionaire class,” said California Federation of Labor Unions President Lorena Gonzalez, who supports Proposition 40.
Saikat Chakrabarti, who unsuccessfully ran for Congress in San Francisco this year, went farther. Chakrabarti is co-founder and president of the progressive think tank New Consensus.
“He’s made no secret of it — he’s going to run for president. And that’s why he’s not just opposed to Prop. 40. He’s vehemently campaigning against it because he needs those billionaires on his side,” Chakrabarti said.
But the billionaires may not be Newsom’s only audience. Fernando Guerra, a political science professor at Loyola Marymount University, said he thinks Newsom’s opposition to the billionaire tax will help him with centrist Democrats he would need to capture the Democratic nomination in 2028.
“It defuses him being the total lefty from California,” said Guerra, who predicted that the tax will get defeated.
If it loses, Guerra said, that only gives Newsom more fuel — especially because the coalition opposing the tax includes the California Teachers Association and some other big unions with political muscle. Guerra said that coalition allows Newsom to make a credibility argument and not just with moderate Democrats.
If it loses, “he’s going to say, as he did with the (unsuccessful 2018 gubernatorial) recall and other things, hey, the voters have spoken, and they defeated this thing. And I was on the right side. I was on the side of the majority of the voters in California, just like I’ll be on the right side with you,” he said.
Jim Kessler at the center-left think tank Third Way said that while more left-leaning candidates could attack Newsom in a presidential primary for opposing Proposition 40, those critiques could backfire.
“That might help him, even in a Democratic primary, because the top issue for Democratic primary voters in presidential elections is, is this person electable? And they don’t think someone overly progressive is electable,” Kessler said. “No one believes that California is an under-taxed state. So there isn’t a belief out there that, oh, there’s all sorts of tax breaks for people and wealthy people in California.”
One of the billionaires who plans to support Newsom in 2028 is Chris Larsen, who’s donated over $12 million to oppose Proposition 40. Larsen said on KQED’s Political Breakdown podcast that he thinks the AI explosion is one of Newsom’s biggest assets in a presidential run.
“You mean that he comes from the fourth largest economy in the world that’s had the highest number of job growth?” he said, joking that the state is “so messed up that this is the center of the most powerful technology ever created.”
Those AI founders could have gone to Miami or Austin, he said.
“They’re not there. They’re all here,” he said. “California is kicking ass.”
But the politics of the proposition do appear to be more complicated than either side is letting on: Some high-profile California Democrats have purposefully stayed mum on the tax — including former Vice President Kamala Harris and former House Speaker Nancy Pelosi, seeming to want to stay out of a fight between deep-pocketed donors and labor unions.
And while polls indicate a tight race, some billionaires seem to be preparing for the possibility of the tax passing: Just last week, Meta struck a new deal with CEO Mark Zuckerberg to keep him in California after he had warned he was considering leaving the state if Proposition 40 passes — offering him a new non-voting class of shares he can sell to foot a multibillion-dollar tax bill.
Meanwhile, backers of Proposition 40 are becoming increasingly aggressive about their disappointment with the governor — and their sense that his opposition to the tax is politically motivated.
On Friday, the Yes on Prop. 40 campaign announced new TV and digital ads calling out Newsom.
But those ads aren’t running in California, where the yes side is being heavily outspent: They’re running in key early presidential primary states, including South Carolina, Nevada, New Mexico, Virginia and New Hampshire.
Dave Regan is president of SEIU-UHW West and the architect of the billionaire tax. In a July interview with KQED’s Political Breakdown, he noted reports that Google co-founder Sergey Brin — who’s been the most prolific contributor among the tech billionaires who oppose Proposition 40 — confronted Newsom about the wealth tax in a treehouse at Larsen’s holiday party last winter.
“I don’t go to treehouse parties with billionaires. I think most Californians don’t go to tree house parties with billionaires,” Regan said. “He is not living in the same world, and he is trying to raise hundreds of millions of dollars from these folks … he is acting like a politician with a campaign problem and not a governor with a healthcare problem.”