Jon Healey was a reporter, member of the editorial board and editor at the Los Angeles Times. He is co-author of “Breaking Into New Hollywood: A Career Guide to a Changing Industry.”
“Don’t tax you, don’t tax me, tax that fellow behind the tree.”
That singsong aphorism was first uttered by U.S. Sen. Russell B. Long, the Louisiana Democrat who chaired the Senate Finance Committee in the mid-20th century. No lawmaker wanted to raise taxes on the masses who could vote them out of office; the ideal target for a squeeze was someone less visible and certainly less numerous. Or at least less popular.
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This year, California voters have a chance to raise taxes on a very unpopular set of fellows behind the tree: billionaires. Proposition 40, the 2026 Billionaire Tax Act, would impose a one-time, 5 percent wealth tax on California residents with a net worth of at least $1.1 billion. For those whose net worth is between $1 billion and $1.1 billion, the levy would rise gradually to 5 percent of those assets.
The main goal, according to the initiative’s sponsoring group (more on it later), is to raise money for the healthcare programs that are being lacerated by the One Big Beautiful Bill Act, which President Trump pushed through Congress last year to (among other things) make permanent the temporary tax cuts he championed in his first term. Ninety percent of the money generated by Proposition 40 would be reserved for healthcare services; the other 10 percent would be dedicated to food aid and education, two other areas hit by Trump’s law.
The federal changes to Medicaid, food stamps and other social programs are expected to have a wide blast radius, threatening more than 1 million low-income Californians and the doctors, clinics and hospitals that care for them. But the one-time revenue boost from Proposition 40 is no fix for the ongoing problems caused by the One Big Beautiful Bill Act, which come to full fruition in 2027 and continue indefinitely.
Think of it this way: If your boss cut your salary, would a Christmas bonus this year make you forget the pain you feel every time you look at your paycheck?
Golden State staff
That’s a flaw so fundamental in Proposition 40’s design, it makes you wonder if the federal cuts are merely a pretext for the measure. Now consider this: The measure’s sponsor is Service Employees International Union-United Healthcare Workers West, the same outfit that has repeatedly pushed initiatives onto the ballot to try to extract concessions from the companies whose workers it was trying to organize. See, for example, the initiatives it authored in 2018, 2020 and 2022 to stiffen regulation of dialysis centers, which are dominated by a handful of non-unionized businesses. Or the series of initiatives it pushed from 2012 to 2016 to limit hospital executives’ pay.
(Or this year’s Proposition 44, which targets nonunionized community health clinics.)
The track record of SEIU-UHW is reason enough to be skeptical about the true intentions behind Proposition 40, which would funnel a huge amount of money into its members’ workplaces. That’s not even taking into account the efforts by the union’s president, Dave Regan, to strongarm the national and state chapters of the SEIU into supporting the proposition, according to the Los Angeles Times.
Fair points, you say, but isn’t it way past time for the estimated 200 billionaires in the Golden State to pick up more of the government’s tab? It’s not like they can’t afford it.
They can indeed. Federal Reserve data document the enormous shift of wealth to the richest members of society over the past 30 years, a shift that has accelerated over the past decade. The Fed’s data also show that the top 1 percent hold more than half of the stock and mutual-fund shares in the U.S.; as the markets have risen, so have their fortunes.
And while middle- and lower-income Americans have most of their wealth invested in their homes — a form of wealth that you do pay taxes on — the wealthy have most of their cheddar socked away in holdings that can minimize or avoid taxes altogether. When they need money, they can borrow against that wealth at low rates instead of cashing out their investments. And when they do cash out, the capital gains they make are taxed at a much lower rate than a paycheck.
Paul Thornton
That’s great fuel for resentment, but it’s not a good argument for Proposition 40. For anyone with a net worth of $1.1 billion or more, the cost of complying — at least $55 million — would be far more than the cost of finding a very nice new home in one of the 49 states that have no billionaire’s tax. State officials say that Proposition 40 could generate a multibillion-dollar windfall for the programs it supports over the next several years as payments gradually come in, but in the meantime, other state programs could suffer as billionaires move out.
The smart way to tax the prodigious amounts of wealth at the top of the U.S. economic pyramid would be to do so at the federal level. Granted, waiting for Congress to do anything substantive these days is like waiting for Godot. If California wanted to try on its own to tap the unrealized gains of the super-rich, a more fruitful way to start might be to attack their tax-avoidance strategies, such as borrowing against their holdings to avoid generating capital gains. There’s also a straightforward idea that wouldn’t require 22 pages of new tax law: simply raising the tax rate on the highest incomes.
If approved, Proposition 40 would take effect only if it garnered more votes than Propositions 41 and 42, the disingenuous and unwise countermeasures thrown up by the billionaire opponents of Proposition 40. Voters would do well to reject all three initiatives, leaving major decisions about complex tax policy to the legislators and governor they elect to do precisely this sort of work.
What do you think? Golden State is a public forum. Send your responses for possible publication to forum@golden-state.org.
