Chapter 1: What is the proposed billionaire tax in California?
Our colleague Laura Nelson covers all things California. And late last year, she came across something that could revolutionize the way money flows through the state, a proposal to tax billionaires. So I spotted this billionaire tax proposal the day that it was sent to state officials. It was actually my fourth day at the journal. I just started working here.
And I flagged it to my editors like, hey. Way to get you hit the ground running. Yeah, thank you to these people for giving me something interesting to do in my first couple of months on the job. California is known for its high taxes, but this one was different. It would impose a one-time 5% tax on the assets of people who have net worths of more than a billion dollars.
Chapter 2: How does the billionaire tax aim to address healthcare funding?
At first, Laura thought, this is interesting, but it might not get very far. Taxing the wealthy is an idea popular in progressive circles, but hasn't gained a lot of traction as policy. So we just decided we would do a first story and introduce people to the idea, and then we thought maybe that would be the end of it for a while. That was obviously not the case.
This specifically kind of took root with the billionaire class and the hyper wealthy in the Bay Area tech scene, and it caught fire from there.
In California, a proposed ballot measure that would tax the wealthiest people in that state sparked some pretty intense backlash.
California's ultra-wealthy railed at the idea. Anyone who has assets over a billion dollars, net of their debt, has to pay a one-time tax of 5% of their net worth, including their private stock, including their real estate. You said 5%? 5%.
Chapter 3: What backlash has the billionaire tax proposal received?
While the proposal's advocates insisted it was necessary.
Supporters say the emergency billionaire tax will prevent a statewide healthcare collapse.
How would you describe what's at stake in this billionaire tax debate? How California specifically will address and work with or work against its wealthiest residents moving forward. One of the things that we've heard kind of coming up as this debate has become more public is the idea that maybe California doesn't really want its hyper wealthy, its billionaires to be here anymore.
And so I think there's something about the relationship between billionaires and the state that is kind of hanging in the balance. Welcome to The Journal, our show about money, business and power. I'm Jessica Mendoza. It's Thursday, February 12th.
Chapter 4: How would the billionaire tax be implemented?
coming up on the show. The proposed tax that's infuriating California's wealthiest. The idea to tax billionaires' assets in California was proposed by an influential healthcare workers' union. It was introduced to try and solve a big problem, how to fund the state's Medicaid budget.
Medicaid, which provides health insurance for low-income Americans, is set to see huge cuts as a result of President Trump's One Big Beautiful Bill, which passed in the summer. The union estimates that California's Medicaid funding could lose about $100 billion. billion with a B. And that is a hole in the budget that is so large that filling it is very challenging, right?
The state of California is looking at losing $100 billion in health care funding for the next five years.
Here's union chief of staff Suzanne Jimenez talking to a news station in Sacramento.
And if we don't do anything right now, we are going to see our hospitals close.
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Chapter 5: What challenges could arise in valuing assets for taxation?
We are going to see ERs close. And so that's really what this billionaire tax is about.
And that is the argument that this health care union is making, that's sponsoring the billionaire tax, is that in order to find that kind of money to backfill this cut, you have to look for a new source of revenue that brings in money that previously, you know, the state had not been tapping. Why turn to billionaires specifically?
I think the union has argued that billionaires are they have the money. I mean, and just to put it really bluntly, they have the money. Right. Like in a way that like middle class people who are feeling more and more squeezed as we look at inflation and what some people have described as a cost of living crisis. It is really hard to talk about raising taxes on middle class Americans.
But their argument is that the billionaires can afford it.
Chapter 6: What impact might the tax have on California's wealthy residents?
Just to take a step back, you talked about people being reluctant to tax the middle class. What is the cost of living situation in California right now? So California is an expensive place to live, I think, as people generally know. Rent is high here. The cost of gasoline is high here. Everything is expensive here.
But the disparity in terms of the richest and the poorest residents of California is really stark. The poverty rate here, adjusted for both living costs and government benefits, is tied for Louisiana for the highest in the country. So it is difficult to be poor here. The proposed tax would apply to people who live in California and have a net worth above $1 billion.
Chapter 7: How are billionaires responding to the proposed tax?
The union estimates there are about 200 people in the state who fall in that category. So how would this billionaire tax actually work? The way that this tax would work, I mean, structurally, it's very different from the way that taxation has worked in the United States historically, which is that when something changes hands, then you pay taxes.
So that could be, you know, if your salary, the government takes a cut when it lands in your bank account. That could be when you sell an asset like a share of stock or a house or a painting. If you make a profit, the government gets a cut of that. So that's how taxes typically work.
In California, residents, including billionaires, mostly pay taxes on their annual income or realized capital gains. But for the ultra-wealthy, much of their net worth is often tied up in assets, and those are not taxable. That could change if this proposed tax takes effect.
Chapter 8: What broader issues does the billionaire tax debate highlight?
So that would mean tax collectors... beginning something new, which is to take a look at the assets that people own and value them and then impose a tax on the value of those assets. So that could include stocks, that could include artwork, that could include intellectual property rights, that could be voting rights in a company that you started or helped to start.
And the tax would apply to people who lived in California as of January of this year. The proposal does raise some thorny questions, like how would auditors determine the value of an asset? So with a public share of stock, you at least know if you have a share of Starbucks, you know how much it trades for on the market, right?
But if you hold a share of a company that's privately held that has not had an initial public offering, how do you value that, right? How do you value something that hasn't changed hands, that you just own? And that's all really untested territory, right? And the proposal still has to make it onto California's ballot in November. For that to happen, the union has to collect a lot of signatures.
If you have ever been in California and you've been asked to sign a petition outside a grocery store or, like, farmer's market or your kid's soccer practice, you are probably participating in the state's ballot measure process. So every campaign has to collect a certain number of signatures to get their measure in front of voters.
And it's pegged to the number of people who voted in the last gubernatorial election. This year, it's about 875,000 valid voter signatures. And even if the proposal makes it on the ballot, a majority of Californians have to vote yes for it to take effect. The billionaires are obviously thrilled about all of this, right? This is great. They're excited. Yeah, no problem.
Nobody's had any issues with any of it. It runs the gamut, right? So I've spent a lot of time over the last couple of weeks talking to billionaires and to people who work with billionaires and who know them. And there is like a broad spectrum of public opinion on this. Jensen Wong, who runs NVIDIA, basically said like, yeah, We choose to live in California.
If California wants to do this, then like California can do that. And there is like a segment of people who are very much in that category, right? Then there's a group of people who are very upset. Coming up next, the billionaires strike back. When times are tough, I turn to my group chats for advice and support. As it turns out, the ultra wealthy aren't that different.
And as the proposed California billionaire tax was gaining steam, the billionaires themselves were texting away. It happened on a signal chat called Save California. Our colleagues discovered it when it was active earlier in the year.
The chat included dozens of tech and Silicon Valley elites, including David Sachs, who is a venture capitalist and the AI and cryptos are for the Trump administration, and Chris Larsen, the co-founder of Ripple. who is a big Democrat, so on opposite sides of the political spectrum.
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