California votes on first US state wealth tax on billionaires

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CEO of Meta Mark Zuckerberg speaks to the press as US President Donald Trump looks on after a meeting with technology executives about artificial intelligence at the White House (AFP/Getty) AFP/Getty

Democratic Gov. Gavin Newsom has warned that the proposal would prompt the state’s wealthiest to move out of California and take their tax money with them (AP) independent.co.uk

Google co-founders Sergey Brin and Larry Page, started cutting ties with the state after the measure was unveiled independent.co.uk

Some traditional Democratic allies, including Planned Parenthood and the California Teachers Association, are part of a coalition opposing the measure (AP) independent.co.uk

Progressive politicians, including Sanders and Massachusetts Sen. Elizabeth Warren, have long supported a federal wealth tax (Getty) Getty

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Californians vote today on Proposition 40, a ballot measure that would impose a one-time 5 percent tax on residents with net worths above $1 billion — the first wealth tax on billionaires' net worth in any US state.

Most of the revenue is earmarked to replace federal healthcare funding cuts; the labour union SEIU United Healthcare Workers West estimates the state will lose $100 billion in federal healthcare money over five years. The union backs the measure. So does Bernie Sanders, who frames it as ensuring the ultra-rich pay their fair share. The opposition, however, is telling: Planned Parenthood and the California Teachers Association — hardly opponents of public spending — have joined a coalition against it, citing concerns over how the revenue would be allocated and what happens to the state budget if wealthy taxpayers simply leave.

That second concern is the entire game. California's budget leans heavily on the income tax of its richest residents, so the taxed have leverage precisely because the state depends on them. Governor Gavin Newsom, whose own party's base supports the measure, opposes it and warns it will prompt the wealthiest to take their tax money elsewhere. The campaign against Proposition 40 has raised roughly ten times as much as the campaign for it, much of it from tech moguls and venture capitalists.

The taxed are already behaving as the opponents predict. Google co-founders Sergey Brin and Larry Page began cutting ties with California after the measure was unveiled. Mark Zuckerberg negotiated an arrangement with Meta that would let him pay the tax without diluting his ownership stake — a private solution to a public levy — and committed to staying in the state for eight years.

The polling itself illustrates the problem with the revenue forecasts. A Public Policy Institute of California survey in early September showed 52 percent of likely voters in favour and 46 percent against. By mid-October the numbers had flipped: 52 percent no, 46 percent yes. A tax on wealth that moves — yachts, residences, incorporation papers — can be dodged by departure in ways a tax on income earned in-state cannot.

The referendum is the first live test of sub-national wealth taxation in the United States: whether a single state, with no exit controls at its borders, can collect from people whose assets are domiciled wherever they choose to say they are.