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Chapter 1: What is the California billionaire tax proposal about?
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Starting right here in California, these billionaires are going to learn that we are still living in a democratic society where the people have some power.
A landmark proposal for a one-time tax on billionaires in California reached a milestone this week. it got enough signatures to put the measure to a vote. Those who have prospered from here in California can afford to invest a little more in keeping California running. Proponents say it's necessary to right the wrongs of an unequal system.
It's like the Democrats are doing everything they can to get me to leave the state. I don't want to.
Opponents say it's going to drive rich taxpayers out of the state.
Just an idiotic concept that is nothing more than political positioning.
But it's not just Republicans and the ultra-wealthy who are against it. It's also a surprising group of Democrats. Today, my colleague Laurel Rosenhall lays out how California arrived at this moment and what it might mean for the fight over inequality nationwide. It's Wednesday, April 29th. Laurel, welcome back to the show. It's great to have you here.
Great to be here. Thank you.
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Chapter 2: Why do proponents believe the tax is necessary?
So this would place a 5% tax on the net worth of any billionaires who are California residents as of January 1st of this year. The money would go into a special fund at the state level and and would have to be spent on healthcare services. It's unusual to tax the assets of a person as opposed to their income.
So their assets would be their stocks, the jewelry they own, the cars in their garage, the paintings. Anything that contributes to their wealth. Notably, it does not include residential property. So that's kind of an interesting exemption. And then it's also unusual on the revenue side to create a special fund where the money would go and that it could only be used for this one purpose.
So unlike most of the tax dollars that the state collects, which go into what's called the general fund, and then the elected leaders of the state government decide how to spend it, this is requiring that 90% of it be spent specifically on health care.
What does that actually mean? Like, does that go to the money that people are spending on their health care?
The concept is that the supporters of this tax want to make up for the massive amount of funding that has been cut by the federal government through what Republicans called their big, beautiful bill. The cuts that were in that bill that Trump signed last year were related to Medicaid and Obamacare subsidies.
And those health insurance programs pumped a huge amount of money into the health care system writ large. So for the supporters of this tax, they say this money is essential to keep hospitals open, to keep emergency rooms operating. and to keep the health care system that Californians rely on operating at the same level that it has been before these cuts go into place.
So just to put a fine point on it, what's unusual about this initiative is that, one, it's taxing assets, and that's really different. Normally, the way people raise taxes on rich people is to tax their income. And the other thing that's unusual is that the vast majority of it, 90 percent of the money, would go to this one purpose, health care.
Right. And this is happening in a state that has more billionaires than any other state. So the supporters of this tax say that it would affect about 200 people. However, there are various wealth management kind of experts that I've interviewed over the last few months, and they've told me they think the number is probably higher.
But right now, no one has an exact count on how many people would have to pay this.
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Chapter 3: What are the main arguments against the billionaire tax?
Hospital workers, including janitors, cooks, some various health care technicians. And they're really concerned that the Medicaid cuts from President Trump last year are going to lead to widespread closures of ER rooms and hospitals in the places where they work.
And the leader of the union is named Dave Reagan, and he has a real long history of using ballot initiatives in his labor negotiation process. And he came up with this idea for this billionaire tax and teamed up with some very respected economists from different universities around the country and put this proposal together really on his own.
Basically, this is coming from something like a maverick operator in the world of unions. And when he starts this thing, it's not like he has a huge coalition behind him.
Yeah, so they're working on building a coalition. They got the support of Bernie Sanders. He flew out to LA and led this rally that was really well attended and energetic. And the union started pouring millions of dollars into gathering these signatures. They trained a bunch of volunteers.
And pretty much anyone who's been at a farmer's market or grocery store in California over the last few months has probably seen someone with a clipboard asking them for a signature on the billionaire tax.
And my understanding is the billionaires did not respond well to all this momentum.
So they started freaking out late last year in advance of this January 1 deadline because the ballot measure says that anyone who was a resident of California on January 1 of this year could be subject to this tax. So at the end of the year, there was a lot of jockeying and there were a few pretty high-profile billionaires who... made moves to leave the state to change their official residency.
A couple of the founders of Google relocated. Sergey Brin moved to the Nevada side of Lake Tahoe. Larry Page left for Florida. And then also some of the people who are really influential in the David Sachs moved to Texas and Peter Thiel moved to Miami.
I have to say, this is always something that wealthy people threaten to leave at any prospect of a tax increase, but they don't always follow through. In this case, you're saying they actually did it.
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Chapter 4: How has public support for the tax manifested in California?
I want it.
So they're really drilling into the specifics of the way that it's structured. Just the idea of taxing assets and the requirement that if this thing passes, you know, every taxpayer in California will have to declare if they are a billionaire or not. And then if so, they will have to declare the value of all of their property and assets. And so there are people who just feel that that is wrong.
They're arguing that a retroactive tax, because it would tax people who are in the state as of January 1st, is unconstitutional and a major argument from Silicon Valley is that this tax would absolutely devastate California's ability to continue dominating in the world of innovation.
Their argument is basically that the state has a lot to lose from this tax, not just the billionaires.
Absolutely. All of those billionaires who would have to pay this wealth tax on their assets, they already pay lots of income tax. And that income tax is what keeps most of the state of California running. It pays for schools and public safety and roads and all of the other things that the state funds. And that is one of the reasons that Governor Gavin Newsom is so vocally against this tax.
He's very concerned about a short term bump in tax revenue from the billionaire tax, but a long term loss from that ongoing loss of income taxes from people who leave. Meanwhile, some of the most influential unions in the state, the teachers union, the umbrella group for SEIU, they haven't publicly taken a position.
And privately, they're concerned about the idea of a tax that gets locked up in this special box and doesn't fund the programs that most tax dollars do. So there's a lot of different angles of potential concern. And that's also why many of the Democratic candidates who are running for governor have expressed some reservations.
Even while they're saying, we think that rich people should pay more, they are raising concerns about the structure of this thing. Again, getting into the weeds about how the money is spent.
Right. Right.
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Chapter 5: What is the unusual structure of the proposed tax?
Without fully committing that he would do it at the national level, but say if we were going to do it, that's what we should explore. And it is worth noting that he has opposed many wealth taxes in the past when they've come up in the California legislature.
Right.
The other thing he focuses on is that California has a very progressive income tax structure and the state does levy a lot of taxes on the wealthiest earners and saying that he agrees with the moral argument to tax the rich.
He's, again, threading the needle. Whereas on the more progressive side of the Democratic Party, you have people like Bernie Sanders saying, look, don't let the perfect be the enemy of the good here. Taxing billionaires is good. Maybe this isn't going to solve all of our problems, solve inequality writ large. But overall, we support this concept.
Obviously, Bernie Sanders doesn't have to be the governor of California, but you see the contrast there.
Exactly. And so for Bernie Sanders, who is deeply invested in the idea of taxing billionaires and fighting the oligarchy, the particulars are of less concern to him. The point is, levying a tax on the people who have so much to help people who have less, he doesn't see any problem with that.
What is the message, do you think, of this fight in California for other states that are pursuing populist policies like this? I'm thinking of New York, where Governor Hochul is proposing a pied-à-terre tax. Because on the one hand, this tax, you said, has a lot of support.
And on the other, there is this very loud opposition that seems to be rooted in a fear of alienating billionaires or losing them because the state has become very reliant on these ultra-wealthy people.
Well, I think there's a couple lessons we can take away from this. One is that the idea of sticking it to the rich is very popular. The other lesson is that it's still really hard to pass and get across the finish line because of all of the particulars involved, because of the way that a tax is structured, and because of how influential the billionaire class is in our society.
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Chapter 6: How are billionaires responding to the proposed tax?
Today's episode was produced by Olivia Natt, Shannon Lin, Claire Tennesketter, and Jack Disidoro. It was edited by Paige Cowett and Patricia Willans. Contains music by Marion Lizano. Our theme music is by Wonderly. This episode was engineered by Chris Wood. That's it for The Daily. I'm Natalie Kitrola. See you tomorrow.