Billionaires may feel like they’re on the ballot this year. And in at least one case their assets are.
We are in year six (at least) of many Americans struggling with the cost of merely existing. Since the pandemic, the cost of food, gas, groceries, insurance, housing, utilities (you name it) have skyrocketed.
At the same time, the Trump administration has prioritized slashing social services, notably healthcare, while cutting taxes especially for the mega-rich. That’s created lots of anger and is among the reasons why pocketbook issues have defined midterm elections, with most major House and Senate races focused on the cost of living.
It’s natural, then, that many Americans are wondering who to blame, and many have landed on the mega-rich. At issue is what Warren Buffett has said for years: He’s paying a lower percentage of his income on taxes than his secretary. And that just isn’t fair.
In competitive House and Senate races, the oligarchs are cited by candidates as not paying their fair share, from Texas to Michigan to Georgia. In California, one of the states that allows direct citizens-to-ballot propositions, we’ll actually be able to see just how far Californians want to go in taxing the rich this November.
California’s Many Propositions
When I first moved to California, I was surprised at just how much we vote on each election. The voter guide for this midterm election is the length of a short novel — 175 pages. Some of this is mandated by California’s Constitution (which itself is about 10 times the length of the U.S. Constitution).
For example, if the state wants to borrow more than $300,000 for general funds taxpayers will cover, the California legislature is required to send the request to the ballot for a taxpayers’ vote.
Since 1911 — the same year the legislature sent a proposition to give the voters the right to decide if women could vote (it narrowly passed) — California citizens have had the right to put their own propositions on the ballot.
Sometimes these propositions are farcical or very specific but these propositions are often a proxy for pure public sentiment. California has changed its real estate tax policies (they are tied to purchase price instead of the market value) and added cancer warnings to vast numbers of products as a result of ballot initiatives.
Propositions don’t all pass and in fact, many don’t even make the ballot. (Billionaire Tim Draper has tried multiple times to get a proposition on the ballot to divide the state into smaller states, the California Supreme Court eventually stopped that).
This year, though, there is a massive fight over a trio of propositions on the ballot about taxing the rich. And the players and the sides aren’t all straightforward.
California’s Tax the Rich
The main proposition on this subject is Proposition 40, which addresses a gaping hole in Medi-Cal, the state’s Medicaid program, and other healthcare costs. This mirrors issues other states are facing, but in California, after the Trump administration worked to curtail the program, there is a growing gap to pay for healthcare for lower-income Californians who qualify for healthcare subsidies.
This led SEIU-United Healthcare Workers West to write a proposition and collect enough signatures, for a state tax, they say, to fill the gap, and then some. It’s a one-time wealth tax of up to 5% on net worth of any California resident as of January 2026 with more than $1 billion in assets, whether in the state or not (including a business, art, or cryptocurrency).
Recent estimates say between 200-250 Californians will fall in that category, and the proposition backers suggest it would raise approximately $100 billion, which could fill an important gap.
But the state doesn’t even record the net worth of its residents. The system to collect that information would have to be built, it will be an arduous process to track down all the assets one holds to levy the tax, and there are exemptions in the bill, so it gets complicated quickly. It’s also obvious that those who want to get out of the tax will pursue all routes to do so. It’s not as easy or clean as advertised, and a handful of billionaires left the state at the end of last year, knowing that the deadline on leaving the state, to avoid the tax was the beginning of the year.
All of that has led to two competing propositions (41 and 42) designed in part to void Prop 40.
It’s also made for very interesting bedfellows. Congressman Ro Khanna and Bernie Sanders, and the California Democratic Party support the tax. While Gov. Gavin Newsom, Democratic Gubernatorial Candidate Xavier Becerra, and the California’s Teachers Association join the Howard Jarvis anti-tax group opposing it.
Gov. Newsom went further and endorsed proposition 42, which would change the California Constitution to prohibit new taxes on the ownership of financial assets and other personal property (with a notable exception of real estate), which would have a much longer consequence, limiting tax policy for years to come.
What it Forecasts
I’ve been saying for some time that some form of a flat tax or tax simplification would be more fair than what we have now. With all the loopholes and deductions it’s very easy to see how one who has wealth, spends wealth to earn more wealth, could be paying a lower percentage of their income in tax than a manager at McDonald’s.
There’s something plainly not fair with that — and ultimately it’s why it’s so easy to blame the rich. Many of my friends who are in business, and risk it all to make lots of money, know it’s not right in America if they don’t set the next generation to be able to dream big too.
And yet, many of those who want to close that gap are against Prop 40. Because the other thing that complicates this is that states compete with each other, and there were plenty of states willing to take Elon Musk when we were done with him and vice versa.
Newsom claims the wealth tax would have to be enacted at the federal level. But then the business owner with a billion dollar valuation business could be forced to sell shares to pay a tax.
Maybe that’s what we want but there are a lot of details not exactly worked out.
The details aren’t what most read. (I mean who really is reading their 175-page voter guide?) It is, however, easy to read “tax the billionaires.” And generally we’ve seen an appetite to tax the rich. Voters just a few years ago passed a mansion tax in Los Angeles that was a tax targeting high-value property transactions.
That tax has inadvertently cost LA when it comes to building apartments, and Nithya Raman, running for mayor, was for it before she was saying we need to reform it.
I’m not sure this will pass. (Californians, like many other Americans, seem to always want to spend and never want to tax). But if it does pass, I’ll tell you one thing: Expect this idea to be a major issue in the next presidential race. The cost of living is not going down. And what happens in California is often a forecast of what’s to come.