When Californians vote next month, they will decide whether to approve an unprecedented plan to tax billionaires. Proposition 40 would impose a new levy on the state’s wealthiest residents. Jo Ling Kent explains what is at stake:
“There’s never been a proposal like this anywhere in the world, so it’s a novel idea,” said Dave Regan, a leader of the healthcare workers union. “We are facing an emergency.”
Regan attributes that emergency to President Trump’s so-called “One Big Beautiful Bill,” which includes reductions in 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. He warned that 3.5 million people could lose their health insurance, while hospitals, clinics and emergency rooms could be forced to close. The cuts could also threaten jobs in his own union, SEIU United Healthcare Workers West.
To help fill that funding gap, Regan and the union organized a petition campaign that placed Proposition 40 on the November ballot. The measure would impose a one-time state tax equal to 5% of the net worth of California’s roughly 200 billionaires.
How confident is Regan that voters will approve it? “Pretty confident,” he said.
Regan’s campaign methods have drawn controversy, and his conduct has faced scrutiny. Still, he says a successful wealth tax would generate $100 billion for California over five years, with 90% of that money reserved specifically for 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 should be considered a solution, Regan answered, “Absolutely. Ask the three-and-a-half million people who are going to lose healthcare coverage.”
Competing Propositions
The proposal has already been followed by high-profile departures from California, including those of venture capitalist Peter Thiel and Google co-founders Larry Page and Sergey Brin. Brin is spending more than $100 million campaigning against Proposition 40.
Adding another layer of uncertainty, two opposition-backed measures—Propositions 41 and 42—will also appear on the ballot. If either measure wins more votes than Proposition 40, it would effectively invalidate the wealth tax.
The billionaires opposing Proposition 40 have also found unlikely allies. Several major unions and prominent Democrats are urging voters to reject it, including California Governor Gavin Newsom, who has called the initiative “flawed,” 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. …”
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“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.”
The debate reflects the complexity of taxing extreme wealth. Billionaires may pay substantial income, property and capital gains taxes, but much of their wealth is held in stocks. Those gains generally are not taxed until the shares 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 Boston College Law professor. “People who have enough money to live on their investments and inheritances legally don’t have to pay any taxes.”
Madoff said Proposition 40 exposes a “deeply broken” tax system and 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 outcome remains uncertain as the campaign enters its final stretch. Polls have tightened, leaving voters more evenly divided. One supporter told us, “To me, it’s bigger than Prop 40. It’s a fight back against the Trump administration.”
A voter opposing the measure said, “We really are concerned about people leaving the state.”
No billionaires contacted by “Sunday Morning” agreed to discuss Proposition 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.