Explaining California’s billionaire tax: The proposals, the backlash and the exodus
The fight over a new tax on California’s billionaires will heat up in the coming months as citizens debate whether the state should crack down on the ultra-rich to better serve ordinary residents.
The proposed billionaire tax that triggered the storm is still a long way from being approved by voters or even voted on, but the idea has already sparked backlash from vocal tech moguls, some of whom have shifted their bases out of state.
Under the Billionaire Tax Act, Californians worth more than $1 billion will pay a one-time 5% tax on their total wealth. Service Employees International Union-United Healthcare Workers West, the union behind the legislation, said the measure would raise much-needed money for health, education and food aid programs.
Other unions targeted the wealthy in Los Angeles, rallying billionaires.
A group of labor unions in Los Angeles said Wednesday it is proposing a ballot measure to raise taxes on companies whose chief executives earn 50 times more than their average-paid workers.
This fight can continue in Golden State as follows:
Who will be affected?
The California billionaire tax will apply to approximately 200 California billionaires residing in the state as of January 1. About 90% of the funds will go to health care, with the rest going to public K-14 education and government food assistance.
Taxes due in 2027 would exclude estates, pensions and retirement accounts, according to an analysis by the Legislative Analyst’s Office, a nonpartisan government agency. Billionaires can spread the tax payment over five years, but they will have to pay more.
Which billionaires are already moving away from California?
Google co-founders Larry Page and Sergey Brin
Google is still headquartered in California, but filings with the California Secretary of State in December show that other companies affiliated with Page and Brin have recently moved out of the state.
For example, one filing shows that one of the companies they run (currently T-Rex Holdings) moved from Palo Alto to Reno last month.
Business Content And New York Times Information about these applications was previously given. Google did not respond to a request for comment.
Palantir co-founder Peter Thiel
Los Angeles-based Thiel Capital announced in December that it was opening an office in Miami. The company did not respond to a request for comment. Thiel recently donated $3 million to the political action committee of the California Business Roundtable, which opposed the ballot measure, according to records filed with the Secretary of State’s Office.
Oracle co-founder and Chief Technology Officer Larry Ellison
Years before the wealth tax proposal, Ellison began withdrawing from California but has continued to 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-market in mid-December, according to Redfin.
Oracle declined to comment.
DoorDash co-founder and Chief Technology Officer Andy Fang
Fang, who was born and raised in California, said in X that he loved the state but was considering moving.
“Stupid wealth tax proposals like this make it irresponsible for me not to plan on leaving the state,” he said.
DoorDash did not respond to a request for comment.
What does it still take to become law?
Proponents of the proposal, led by the health union, must collect about 875,000 registered voter signatures and submit them to county election officials by June 24 to get on the ballot.
If passed on the November ballot, the proposal will become the focus of intense scrutiny and debate as both parties line up large war chests to bombard voters with their positions. A majority of voters would need to approve the ballot measure.
The billionaires’ lawyers also signaled that the fight would not end even if the voting decision was passed.
“Our clients are prepared to engage in a vigorous constitutional challenge if this measure advances,” Alex Spiro, an attorney who represents billionaires like Elon Musk, wrote in a letter to California Governor Gavin Newsom in December.
What are the chances of the initiative?
It’s unclear whether the ballot measure has a good chance of passing in November. Newsom opposes the tax, and his support has proven important for ballot measures.
In 2022, he opposed a ballot measure that would subsidize the electric vehicle market by increasing taxes on Californians who earn more than $2 million annually. The measure failed. The following year, he opposed legislation taxing assets exceeding $50 million. The bill was shelved without a vote in the Parliament. a compelling bill annual tax Initiatives aimed at California residents with net worth over $30 million also failed in 2020.
But Sen. Bernie Sanders (I-Vt.) and Rep. Ro Khanna (D-Fremont) have supported the wealth tax proposal, and Californians have previously passed temporary tax measures. In 2012, they approved Proposition 30 to increase the sales tax and personal income tax for residents with annual incomes of more than $250,000.
Could it solve California’s problems?
The Legislative Analyst’s Office said: December letter He said 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 government will collect is very difficult to predict for many reasons. For example, it is difficult to know what actions billionaires will take to reduce the amount of taxes they pay. Additionally, much of the wealth is based on constantly changing stock prices,” the letter said.
California economist Kevin Klowden said the tax could create future budget problems for the state. “The real problem is that this is a one-time fix for a systemic problem,” he said.
Supporters of the proposal said the measure would raise about $100 billion and disputed the idea that billionaires would flee.
“We’re seeing a lot of cheap talk from billionaires,” said Brian Galle, a UC Berkeley law professor who helped write the proposal. “Some people actually leave and change their behavior, but the vast majority of rich people don’t because it doesn’t make sense.”
Still, pushback is growing.
Palo Alto-based venture capitalist Chamath Palihapitiya estimates that the loss of income for billionaires who have already left the state will result in more losses in tax revenue than gained by the new tax.
“By starting this ill-conceived attempt at a wealth tax, the California budget deficit will explode,” he wrote in X. “And we still don’t know if the tax will come to a vote.”
The union backing the initiative says the “billionaire exodus narrative” is “wildly exaggerated”.
“Right now it looks like the overwhelming majority of billionaires are choosing to stay in California after Jan. 1,” said Suzanne Jimenez, executive director of SEIU-United Healthcare Workers West. “Despite weeks of talk about Chicken Little claiming that a modest tax would trigger a mass departure, only a tiny percentage remain before the deadline.”
Times writer Seema Mehta contributed to this report.
