In the final days of 2025, some of California’s wealthiest residents began cutting ties with the state by buying new homes and relocating business offices to Nevada, Texas or Florida.
The reason? The possibility of a new tax on California billionaires.
Though the proposal faces political and legal hurdles, the itinerant billionaires were taking no chances. The proposal has set off a feverish debate in California, as well as a lot of confusion.
Here’s what to know about California’s potential new tax on billionaires.
Where did the idea come from?
A large labor union representing health care workers drafted an initiative called the “2026 Billionaire Tax Act” and is currently gathering signatures in hopes of putting it on the November ballot.
The organization, Service Employees International Union-United Healthcare Workers West, largely represents employees at private hospitals, including cooks and janitors. Within California, the union is known for its aggressive use of the ballot initiative process to pressure health care companies.
Voters may be familiar with the organization because it placed measures on three past ballots that would have placed new requirements on dialysis clinics, whose workers it wanted to unionize. None of those measures passed.
What needs to happen for the tax to become law?
First, supporters must gather nearly 900,000 valid signatures from California voters to place it on the ballot. In California, groups that have enough money can often qualify their measures by paying signature gatherers until they get enough petitions signed.
Then, a majority of voters would have to approve it. If that happens, opponents would most likely file lawsuits immediately that would challenge its legality, so the tax would have to survive court challenges.
How would the tax work?
The initiative would require Californians with a net worth beyond $1.1 billion to pay a one-time tax equal to 5 percent of their assets, while those worth between $1 billion and $1.1 billion would pay a smaller percentage. It would apply retroactively to anyone who was living in California as of Jan. 1, 2026, and taxpayers could spread their payments across five years starting in 2027.
The union figures that California is home to approximately 200 billionaires who would have to pay the tax.
The state would be required to spend 90 percent of the new revenues on health care, with the rest devoted to food assistance and education. The health care workers union argues that the tax is necessary to make up for federal cuts to Medicaid, Affordable Care Act subsidies and food assistance that President Trump signed into law last year.
California’s nonpartisan legislative analyst and the governor’s Department of Finance estimated in a joint review that the tax would deliver tens of billions of dollars in one-time money for the state, but that it could lead to hundreds of millions or more in continuing losses from billionaires leaving California to avoid the tax.
Who supports the California billionaire tax?
Besides the union behind the measure, Senator Bernie Sanders, Independent of Vermont, has endorsed the proposal. Representative Ro Khanna, Democrat of California, also backs it but said he would like to see provisions that allow start-up founders to defer the tax if their companies are not yet profitable.
Who is opposed?
Gov. Gavin Newsom said this month that he had been working behind the scenes to try to stop the proposal and vowed to defeat it if it made the ballot. The governor said the mere introduction of the initiative was already hurting California by driving some billionaires to relocate, taking their tax dollars with them.
Business leaders have begun contributing money to oppose the measure. Peter Thiel, a venture capitalist and chairman of Palantir, has given $3 million to one effort. Ron Conway, a major tech investor, has donated $100,000 to another.
David Sacks, a venture capitalist appointed by President Trump to guide policy on artificial intelligence and cryptocurrency, has been criticizing the billionaire tax proposal on social media and on the podcast he hosts with other Silicon Valley investors.
Interestingly, other labor unions in California have remained quiet and may not support the ballot measure in the end. There are disagreements over how the tax is structured, as well as whether it is the right move politically.
Why might this billionaire tax pass?
Supporters could wage a compelling campaign that taps into voters’ economic anxieties and frustration about wealth inequality. They would most likely highlight the cuts to the health care system that are looming from the federal law Mr. Trump signed last year, and argue that hospitals could close without the billionaire tax.
Voters are often leery of tax increases. But because very few voters would be required to pay the billionaire tax, most may be inclined to pass it.
Why might this tax idea fail?
Mr. Newsom has already committed to killing the tax, and he holds considerable weight in California government. He is hoping to derail the proposal before it ever qualifies for the ballot.
If it were to reach the ballot, however, opponents would wage a fierce and costly campaign to fight the wealth tax. Billionaires could find allies in other labor unions that would not benefit from the tax and emphasize that it could decrease long-term funding for schools, universities and other popular services. They could argue that it would damage California’s start-up economy and diminish the state’s global standing as the cradle of technological innovation.
Opponents could also try to qualify rival measures for the same ballot. That could make it harder for proponents to get enough signatures or have the effect of confusing voters and prompting them to vote “no.” Opponents have already drafted a handful of initiatives that could undermine the billionaire tax.
It’s also possible that the union could fail to collect enough signatures. More than a dozen initiative efforts have paid petitioners asking voters for signatures at the moment, and some campaigns are paying more than the union has. Most other efforts aiming for the November ballot began collecting signatures earlier.
While the union has qualified measures before, it spent $1.9 million gathering signatures in 2018 for an initiative that called for a new tax on millionaires to pay for health care. The proposal never made it onto the ballot.
Is there another path?
California law gives initiative backers a window to negotiate with lawmakers at the State Capitol before the ballot is finalized. It’s not uncommon for groups to collect signatures as a way to build political leverage. Proponents are sometimes willing to pull their measures off the ballot if they can strike a satisfactory deal with lawmakers.
The union backing the billionaire tax has said it is fully committed to the ballot route, but it has a history of using initiatives as leverage in its negotiations.
In 2023, it struck a deal with Mr. Newsom and legislative Democrats to pass a statewide $25 per hour minimum wage for health care workers after backing similar initiatives in various cities. In 2016, the union sponsored a statewide initiative to raise California’s minimum wage, but withdrew it from the ballot after then-Gov. Jerry Brown signed legislation increasing the wage to $15 an hour.
Laurel Rosenhall is a Sacramento-based reporter covering California politics and government for The Times.
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