A top contender for the position of California governor is Tom Steyer.
Although the self-proclaimed philanthropist, political activist, and environmental advocate is working to make California more affordable, Steyer faces doubt due to his wealth; he is a billionaire. He built his estimated $2.4 billion fortune through his work as a Wall Street investor and hedge fund manager.
With the main election just a few weeks away and early voting already in progress, residents of California will determine if Steyer possesses the necessary qualities to succeed Gov. Gavin Newsom.
Residents of the Golden State will also vote on whether the California Billionaire Tax Act should be implemented.
Steyer hasn't shown any concern about this concept. In reality, he has advocated for the ultra-wealthy, including himself, to contribute more through taxes, as he mentioned in one instance.Substackpost. However, he did express one criticism of the proposal, referring to it as "a temporary solution to a permanent, structural issue."
Their suggestion aims to implement a one-time wealth tax of 5% on individuals or married couples who have assets surpassing $1 billion.
Furthermore, it would apply to anyone living in California as of January 1, 2026.
Chester Spatt, a finance professor at Carnegie Mellon University, who previously worked as the chief economist for the U.S. Securities and Exchange Commission in the early 2000s, also expressed worries about the structure.
"You're advising people to depart merely because there's a chance it could be adopted," he stated.
What is the mechanism behind a billionaire wealth tax?
The National Taxpayers Union Foundation's Andrew Wilford described the plan as "an unusual form of taxation."
"Never before has a state taken action in this manner," he stated.
A net worth tax is applied to an individual's overall assets, such as real estate, companies, and shares, minus any debts they have.
The suggestion comes as a reaction to the Trump administration's One Big, Beautiful Bill initiative, which implemented actions aimed at revising medical provider tax programs.
"States increase their Medicaid expenditures to obtain a higher reimbursement rate from the federal government," Wilford explained.
Medical facilities, such as hospitals, are subject to higher state taxes, and these increased expenses are incorporated into Medicaid payments made by the federal government. While states collect more tax income, they claim that the costs will be covered by the medical providers, yet it is actually federal taxpayers who end up bearing the burden.
"The process involved is somewhat complex, but the outcome is that states can obtain a greater federal contribution without actually increasing their own expenditures," Wilford stated.
The major, comprehensive bill aimed to limit the amount states can tax and then request reimbursement for, leading to "California being scheduled to receive a lower federal Medicaid match," according to Wilford. The one-time billionaire tax is intended to address this shortfall.
The Service Employees International Union-United Healthcare Workers West, an organization representing healthcare employees in California, introduced a ballot measure prior to the November 2026 election.
SEIU-UHW delivered 1.55 million signatures on April 27 in order to be eligible for the ballot.
The vast and increasing wealth of billionaires provides advantages that most people cannot access. While nurses, teachers, firefighters, and tech workers pay taxes on almost all of their income, billionaires can avoid paying taxes on significant amounts.the initiative states.Their main resources—stocks, companies, and property—increase in value each year, yet this appreciation is only taxed when sold, and billionaires frequently don't have to sell, meaning they owe no tax on their increasing wealth.
It's important to mention that this isn't the first instance of SEIU supporting such a concept. The national group also supported Massachusetts Sen. Elizabeth Warren's Ultra-Millionaire Tax Act, which is an annual wealth tax, along with Vermont Sen. Bernie Sanders' proposals for Medicare-for-All funding. Neither of these bills moved forward in Congress.
The suggestion is already causing movement away from California.
Wilford contended that the backward-looking aspect of the billionaire tax is "likely unconstitutional."
Even though the provision was designed to stop wealthy individuals from evading taxes, "we have already witnessed several California billionaires departing."
"The advocates of this proposal claim they will generate $100 billion in income," stated Wilford, while pointing out that the figure is excessively high.
"The initial approach assumed that no one would depart," stated Wilford. Howeverone studyA study from March revealed that the public exits of specific billionaires from California will lead to $24.7 billion less in tax income for the state over time due to the wealth tax, canceling out any potential benefits from the tax.
Wilford pointed out that it's significant to note that numerous individuals with substantial wealth are departing the state, relocating their assets without the same level of public attention as figures like former Google CEO Larry Page and former PayPal CEO Peter Thiel. These represent permanent losses of income for the state.
As reported by Open Secrets, a small number of billionaires—specifically top earners from major Silicon Valley companies such as Affirm, DoorDash, Google, Palantir, Ripple, and Stripe—have contributed over $120 million to oppose the billionaire wealth tax proposal. Notably, Sergey Brin, co-founder of Google, gave $66 million to the Building a Better California political action committee.
Wilford mentioned that the 5% tax rate is "relatively high," even when compared to the limited number of European countries that impose a wealth tax, with Spain's rate reaching up to 3.5%.
California loses a resident every 2 minutes and 37 seconds, according to recent IRS migration data.National Taxpayers Union FoundationHis reporting. The state also lost approximately $4 billion in state and local income.
"California politicians occasionally mention this in a subtle way because they aren't keen on acknowledging it," said Wilford. "However, ... the tax base is shrinking" as individuals choose to relocate to states such as Texas and Florida that don't impose an income tax.
"we're witnessing these technology entrepreneurs who are beginning to ask, 'do I truly need to be in silicon valley?'" wilford stated.
He also pointed out that California imposes higher taxes on the wealthy compared to any other state in the nation, with a top income tax rate of 14.4%.
Spatt mentioned that California's already elevated taxes contribute to its growing uncompetitiveness.
"They offer only one product, which is the weather. However, there are boundaries, even to that," he stated.
"California should concentrate on certain aspects of its financial expenditures, such as railroads that they haven't constructed a single section of track," said Spatt.
In the meantime, this suggestion does not address any of Golden State's financial issues, he stated.
The argument is that this is the fund meant to cover Medicaid shortages, but these are yearly shortfalls. The claim is that this will be a one-time tax. Now, how can you finance ongoing yearly shortfalls with a single, one-time tax?
The nationwide discussion regarding the wealth tax
The suggestion has sparked doubts regarding California's reliability.
The wealth tax was also discussed during the Biden administration. His 2025 budget plan sought to apply a 25% wealth tax to families with incomes of $100 million or higher, raise the Medicaid tax for individuals earning $400,000 or more, and boost corporate taxes, according to a previous report from the Deseret News.
However, Spatt noted, there is a higher likelihood of implementing a wealth tax at the federal level because high-income individuals would need to leave the country to evade the tax.
It's much simpler to just leave California.
The concept of a wealth tax has been discussed in other states, but none have come near getting it on the ballot.
Jeff Burton, a Republican strategist and one of the co-founders at Maven Advocacy Partners, mentioned that for many years, the pattern has been that when California takes a certain direction, a portion of the country follows suit.
The matter of a wealth tax extends beyond the Golden State. Should it pass, it serves as an indication to progressive advocates that similar initiatives could be feasible in other states, noted Burton, who formerly held the position of deputy executive director at the National Republican Congressional Committee.
Burton stated, "It's going to become a national conflict that begins in California."
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