Sacramento: California voters are deciding whether the state should become the first in the United States to impose a tax on billionaires' wealth, with a ballot measure dividing Democratic leaders and triggering one of the most expensive electoral campaigns in the state's history.
Proposition 40 would impose a one-time tax of 5 per cent on the net worth of California residents whose wealth exceeds $1 billion. Most of the revenue would go towards replacing federal funding cuts to healthcare.
Vermont Senator Bernie Sanders has described the proposal as a major step towards addressing wealth inequality and ensuring that the ultra-rich pay their fair share. However, Democratic Governor Gavin Newsom has warned that the tax could prompt wealthy residents to leave California, taking their tax contributions with them.
The campaign against the measure has raised roughly 10 times as much money as its supporters. Technology executives and venture capitalists have contributed millions to a political action committee opposing the proposal.
Some billionaires have already begun reconsidering their ties to California since the measure was introduced. Google co-founders Sergey Brin and Larry Page have started cutting ties with the state. Meta CEO Mark Zuckerberg, meanwhile, has said he plans to remain in California for eight years and has reached an arrangement with Meta that would help him pay the tax without giving up his ownership stake in the company.
The proposal is backed by the powerful labour union SEIU United Healthcare Workers West, which argues that the tax is needed to compensate for federal healthcare funding cuts.
The union estimates that California could lose $100 billion in federal healthcare funding over five years.
“It's time to collect those taxes so we can ensure that our healthcare system is still safe,” said Lorena Gonzalez, president of the California Federation of Labor Unions.
However, some traditional Democratic allies, including Planned Parenthood and the California Teachers Association, have joined the opposition. They have raised concerns about how the revenue would be distributed and the possible impact on the state budget if wealthy taxpayers leave.
California relies heavily on income tax contributions from its richest residents, making the prospect of an exodus a concern for opponents of the measure.
California voters remain divided over the proposal. A Public Policy Institute of California poll conducted in mid-October found that 52 per cent of likely voters planned to oppose the measure, while 46 per cent supported it.
That marked a shift from an early September survey by the same institute, when 52 per cent of likely voters said they would support the tax and 46 per cent were against it.
Robert Swonger, an independent voter and auto glass technician who lives near Sacramento, said he planned to vote against the proposal.
“Obviously, I would like billionaires not to have as much money as they do,” he said. “But I don't believe taxing them out of existence is going to work.”
Anthony Serrano, a Democrat from Folsom who works for healthcare provider Kaiser Permanente, said he was leaning towards supporting the tax because he generally backed measures that could benefit healthcare.
“Anything that is a positive for healthcare,” he said.
Even if Proposition 40 wins majority support, it could be prevented from taking effect if either of two other measures on this year's ballot passes with more “yes” votes.
The proposals, backed by the political action committee Building a Better California, seek to prohibit new taxes on financial assets and other personal property, excluding real estate.
The committee has raised more than $333 million, with Brin contributing about 30 per cent of that amount.
Progressive politicians, including Sanders and Massachusetts Senator Elizabeth Warren, have long advocated a federal wealth tax. Newsom has argued that a California-only levy would put the state at a disadvantage, although he supports a national minimum tax on people with net worths exceeding $100 million.
Before Sanders held rallies in California cities last month urging voters to back the proposal, Newsom told reporters that the senator's focus on wealth inequality was “spot-on”. However, he added that “on this issue, we fundamentally disagree”.
Gonzalez said the campaign had opened up a wider debate on taxing extreme wealth, regardless of the ballot outcome.
“We are taking a step forward, and we are showing other states that you can look them in the eye — you can look these billionaires in the eye — and take them on,” she said.