The battle over a new tax on California billionaires will intensify in the coming months as citizens argue over whether the state should squeeze the ultra-rich to better serve its ordinary residents.
The proposed multibillion-dollar tax that sparked the storm is still far from being approved by voters or even reaching the polls, but the idea has already sparked backlash from tech moguls, some of whom have already moved their bases out of state.
Under the Millionaire Tax Act, Californians worth more than $1 billion would pay a flat 5% tax on their total wealth. The Service Employees International Union-United Healthcare Workers West, the union behind the law, said the measure would raise much-needed money for health care, education and food assistance programs.
Other unions have attacked billionaires, targeting the wealthy in Los Angeles.
A Los Angeles union group said Wednesday it is proposing a ballot measure to raise taxes on companies whose CEOs earn 50 times more than their median-wage employees.
Here's how this fight could continue to play out in the Golden State:
Who would be affected?
California's billionaire tax would apply to about 200 California billionaires who reside in the state starting Jan. 1. About 90% of the funds would go to health care and the rest to K-14 public education and state food assistance.
The tax, which expires in 2027, would exclude real estate, pensions and retirement accounts, according to an analysis by the Legislative Analyst's Office, a nonpartisan government agency. Billionaires could spread their tax payments over five years, but they would have to pay more.
Which billionaires are already distancing themselves from California?
Google co-founders Larry Page and Sergey Brin
Google is still headquartered in California, but documents filed in December with the California Secretary of State show that other companies linked to Page and Brin recently moved out of the state.
One filing, for example, shows that one of the companies they managed, now called T-Rex Holdings, moved from Palo Alto to Reno last month.
Business Insider and the New York Times previously reported on these filings. Google did not respond to a request for comment.
Peter Thiel, co-founder of Palantir
Los Angeles-based Thiel Capital announced in December the opening of an office in Miami. The firm did not respond to a request for comment. Thiel recently contributed $3 million to the California Business Roundtable political action committee, which opposes the ballot measure, records provided to the Secretary of State's Office show.
Larry Ellison, co-founder and CTO of Oracle
Years before the estate tax proposal, Ellison began withdrawing from California, but he has continued to increasingly distance himself from the state since the proposal emerged.
Last year, Ellison sold his San Francisco mansion for $45 million. The home at 2850 Broadway sold off the market in mid-December, according to Redfin.
Oracle declined to comment.
Andy Fang, co-founder and CTO of DoorDash
Fang, who was born and raised in California, said in X that he loves the state but is thinking about moving.
“Stupid estate tax proposals like this make it irresponsible for me not to plan to leave the state,” he said.
DoorDash did not respond to a request for comment.
What would still be missing to become law?
To qualify for the ballot, proponents of the proposal, led by the health care union, must gather nearly 875,000 signatures from registered voters and submit them to county election officials by June 24.
If it appears in the November election, the proposal would be the focus of intense scrutiny and debate, as both sides have already raised large war chests to bombard voters with their positions. A majority of voters would need to approve the ballot measure.
Lawyers for billionaires have also noted that the battle will not end even if the ballot measure passes.
“Our clients are prepared to mount a vigorous constitutional challenge if this measure moves forward,” Alex Spiro, a lawyer who has represented billionaires like Elon Musk, wrote in a December letter to California Gov. Gavin Newsom.
What are the possibilities of the initiative?
It is unclear whether the ballot measure has a good chance of passing in November. Newsom opposes the tax and his support has been important for ballot measures.
In 2022, he opposed a ballot measure that would have subsidized the electric vehicle market by raising taxes on Californians making more than $2 million a year. The measure failed. The following year, he opposed legislation that taxed assets over $50 million. The bill was shelved before the Legislature could vote on it. A bill that would impose an annual tax on California residents whose net worth exceeded $30 million also failed in 2020.
However, Sen. Bernie Sanders (I-Vt.) and Rep. Ro Khanna (D-Fremont) have backed the estate tax proposal, and Californians have approved temporary tax measures before. In 2012, they passed Proposition 30 to increase the sales tax and personal income tax for residents with an annual income of more than $250,000.
Could it solve California's problems?
The Legislative Analyst's Office said in a December letter that the state would likely collect tens of billions of dollars from the wealth tax, but could also lose other tax revenue.
“The exact amount the state would collect is very difficult to predict for many reasons. For example, it is difficult to know what actions billionaires would take to reduce the amount of taxes they pay. Additionally, much wealth is based on stock prices, which are always changing,” the letter said.
California economist Kevin Klowden said the tax could create future budget problems for the state. “The problem is that this is a one-size-fits-all solution to what is a systemic problem,” he said.
Supporters of the proposal said the measure would raise about $100 billion and rejected the idea that billionaires would flee.
“We see a lot of cheap talk from billionaires,” said Brian Galle, a UC Berkeley law professor who helped draft the proposal. “Some people actually go away and change their behavior, but the vast majority of rich people don't, because it doesn't make sense.”
Still, the reaction has been increasing.
Chamath Palihapitiya, a Palo Alto-based venture capitalist, estimates that the loss of income from billionaires who have already left the state would cause more losses in tax revenue than those gained from the new tax.
“By initiating this ill-conceived attempt to impose an asset tax, California's budget deficit will explode,” he posted on X. “And we still don't know if the tax will even make it to the ballot box.”
The union that supports the initiative says that “the multimillion-dollar exodus narrative” is “wildly exaggerated.”
“Right now, it appears that the overwhelming majority of billionaires have chosen to stay in California past the Jan. 1 deadline,” said Suzanne Jimenez, chief of staff for SEIU-United Healthcare Workers West. “Only a very small percentage left before the deadline, despite weeks of Chicken Little discussions claiming that a modest tax would trigger a mass exit.”
Times staff writer Seema Mehta contributed to this report.
