When California voters go to the polls next month, they will decide whether to approve an unprecedented proposal to tax billionaires. Jo Ling Kent explains what Proposition 40 would do:
“There’s never been a proposal like this anywhere in the world, so it’s a novel idea,” said healthcare workers union leader Dave Regan. “We are facing an emergency.”
Regan attributes that emergency to President Trump’s so-called “One Big Beautiful Bill,” which includes cuts to federal Medicaid funding over the next several years.
“What we’re trying to do is restore $100 billion worth of health care cuts,” Regan said. “Three-and-a-half million people lose health insurance. Hospitals, clinics, and emergency rooms will close.” He also warned that the reductions could threaten jobs within his union, SEIU United Healthcare Workers West.
To close that funding gap, Regan and the union organized a petition drive placing a one-time, 5% state tax on the net worth of California’s roughly 200 billionaires on the November ballot. The measure is known as Proposition 40.
How confident is Regan that voters will approve it? “Pretty confident,” he said.
Regan’s approach has drawn controversy, and his conduct has come under scrutiny. Still, he projects that the wealth tax could generate $100 billion for California over five years, with 90% dedicated specifically to healthcare.
“We’re not trying to pretend that it’s a permanent solution,” Regan said. “But a five-year solution is better than no solution. And that gives the state of California an opportunity to figure out what’s the right permanent solution.”
When asked whether a five-year tax qualifies as a solution, Regan answered, “Absolutely. Ask the three-and-a-half million people who are going to lose healthcare coverage.”
Competing Propositions
Since the proposal emerged, several billionaires have left California, including venture capitalist Peter Thiel and Google co-founders Larry Page and Sergey Brin. Brin is spending more than $100 million to defeat the measure.
Adding another layer to the ballot fight, two opposition-backed measures—Propositions 41 and 42—could also determine Prop 40’s fate. If either receives more votes than Prop 40, it would effectively cancel the wealth tax.
The billionaire opposition also includes some unlikely allies. Several major unions and prominent Democrats are urging voters to reject the measure, among them California Governor Gavin Newsom, who calls Prop 40 “a flawed initiative,” and former Democratic Congresswoman Katie Porter.
“I generally, as a progressive, have fought to make sure that the ultra-wealthy pay more,” Porter said. “But this tax doesn’t do that correctly, causing these people to pick up and to leave. We want billionaires to create jobs here, to start companies here. …
“You don’t get a second bite at tax policy,” she added. “A tax that you pass has enduring consequences. When somebody leaves California, we can no longer tax them. That is a permanent problem. It is much harder to get tax base back than it is to grow it in the first place.”
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The tax debate is complicated by the way billionaire wealth is held. While wealthy Californians may pay substantial income, property and capital gains taxes, much of their net worth is invested in stocks. Those gains generally are not taxed until the assets are sold.
“It’s a system in which essentially the richest Americans have been written out of the tax system, much like the aristocracy of pre-revolutionary France,” said Ray Madoff, a professor at Boston College Law. “People who have enough money to live on their investments and inheritances legally don’t have to pay any taxes.”
Madoff describes Prop 40 as a response to a “deeply broken” tax system and says it could still have value. “My feelings about Prop 40 are that meaningful change has to happen at the federal level,” she said. “And I think that to the extent Prop 40 creates an incentive for meaningful change to take effect on the federal level, then I’d say it would be helpful. On its own, it obviously can’t do anything; it’s just patching a temporary hole, right? But I think that there is a certain amount of symbolic value of Prop 40.”
“California is America’s coming attraction”
The contest appears to be tightening, with California voters increasingly split. One supporter told us, “To me, it’s bigger than Prop 40. It’s a fight back against the Trump administration.”
A voter opposed to the measure said, “We really are concerned about people leaving the state.”
No billionaire contacted by “Sunday Morning” agreed to discuss Prop 40—except Jensen Huang, founder and CEO of Silicon Valley-based chipmaker Nvidia. “I don’t mind paying taxes; the more you make, the more taxes you pay, so I’m okay with that,” Huang said. “I don’t like tax dollars wasted. But I also support all that this country represents.”
Huang’s first job was as a dishwasher at Denny’s. Today, Forbes lists his net worth at about $200 billion, making him the seventh richest person in the world.
“I am the ultimate American dream,” Huang said. “If not for this country, the education, the ability to create a new company, pursue your dreams, I wouldn’t have met all the people that made Nvidia possible. I love this country in every possible way. And it’s not perfect, but it’s incredible.”
Even if you end up paying perhaps $8 billion over five years? “The fact that I can afford to pay $8 billion in taxes over five years is a privilege,” Huang replied. “I’m not afraid of paying taxes. I’m just afraid of being poor.”
Whether you’re poor or rich, for or against the billionaire tax, its architect, Dave Regan, is already looking beyond November – and beyond California. “Other states around the country are going to start looking to follow California’s lead, just like it’s happened so many times in the past,” he said. “California is America’s coming attraction, and this is coming to a state near you after we pass it on November 3.”
Story produced by Dustin Stephens. Editor: Emanuele Secci.
