CALIFORNIA — Governor Gavin Newsom intensified his opposition to California’s proposed 2026 Billionaire Tax Act at a Bloomberg News event in San Francisco on Thursday, warning the ballot measure would backfire on the very public services its supporters want to protect.
“Over the years, you would see a significant reduction in taxes because taxpayers will move,”
Newsom said the comment while citing new data from the state’s nonpartisan Legislative Analyst’s Office predicting a one-time windfall followed by long-term revenue losses as billionaires relocate.
Newsom argued the proposed one-time 5% tax on the net worth of residents exceeding $1 billion as of December 31, 2026 “actually will reduce investments in education. teachers and librarians, childcare. firefighting and police,” as the tax base shrinks and lawmakers confront recurring obligations.
He called California’s tax structure “the most progressive in the United States,” but said the proposal does not solve budget problems he described as worsened by federal H.R. 1 (the One Big Beautiful Bill Act).
The measure, known as the 2026 Billionaire Tax Act, would create a new one-time levy on wealth held by the state’s richest residents, targeting those with net worth above $1 billion and collecting on a wide range of assets beyond ordinary income.
Supporters drafted the initiative through the Service Employees International Union-United Healthcare Workers West (SEIU-UHW), which represents over 120,000 health care workers, and backers argue the state should claim a share of extraordinary gains to stabilize services.
The proposal has moved through early steps toward the ballot as Initiative No. 25-0024 and is in signature-gathering for the November 2026 election, setting up a high-profile fight over whether California should adopt a one-time Billionaire Tax.
Newsom said he has engaged directly and indirectly with the initiative’s proponents for five or six months, met with affected billionaires, and has no veto power because the measure is a voter initiative.
He rejected the plan as “the wrong answer” from “one local in [SEIU],” while saying he remained open to discussing a national wealth tax.
Under the initiative’s mechanics, the tax would apply to roughly 200-255 billionaires, with estimates varying, and would assess holdings that can include stocks, bonds, businesses, art, collectibles, and intellectual property.
The measure would exclude real estate and most retirement accounts, aiming to focus on financial and business wealth while carving out categories that are common for middle-class savers.
A phase-out would begin around $1-1.1 billion in net worth, reducing the liability as wealth approaches the threshold and narrowing the number of affected residents at the lower end of the targeted range.
The measure is retroactive to California residents as of January 1, 2026, a feature that would tie the tax to residency status from the start of the year even though the threshold date in the proposal is December 31, 2026.
Taxpayers would owe the charge in 2027, and the initiative offers an optional 5-year payment plan to spread out payments rather than requiring a single lump sum.
Anyone using the installment option would face a 7.5% annual nondeductible charge on an unpaid balance, adding a cost that supporters describe as an incentive to pay promptly and opponents describe as punitive.
Backers have promoted large revenue expectations, citing a U.C. Berkeley study that projects around $100 billion in one-time revenue, a number that has helped elevate the measure into a central talking point in the state’s broader fiscal debate.
The Legislative Analyst’s Office estimates “tens of billions,” a lower and less certain range that it ties to the volatility of billionaire wealth, exposure to swings in financial markets, and the risk that some targeted residents leave the state.
Newsom seized on the LAO’s relocation risk, arguing that the state could collect a short-term surge and then see a persistent reduction in revenue as the tax base changes.
At the Bloomberg News event, he framed the issue around consequences for public services, linking billionaire mobility to future cuts rather than to a single election-year infusion.
The initiative directs proceeds into a new 2026 Billionaire Tax Reserve Fund, with spending set for healthcare, education, and food assistance, supporters say, to help shore up programs vulnerable to budget cycles.
The measure’s fiscal arguments also intersect with healthcare financing, as supporters point to projected losses tied to federal policy changes.
Backers have argued the new reserve fund could help offset projected Medicare/Medicaid losses of $66-128 billion over 10 years, a figure cited by the California Hospital Association.
Public opinion data included in the campaign debate suggests the measure starts with an advantage but not a decisive one, with a Mellman Group poll showing 48% likely voter support and 38% opposition.
Even with those numbers, Newsom’s comments signaled a willingness to confront a proposal backed by a major union constituency, a politically sensitive fight in California where organized labor plays a central role in Democratic politics.
The debate has also featured examples of wealthy residents and tech leaders responding to the prospect of higher taxes by considering moves or shifting operations.
Relocation concerns have become part of the public argument, with the campaign citing that Google co-founder Larry Page moved some business out of California citing the tax.
The broader discussion has also included reports that Peter Thiel is considering an exit, adding another prominent name to the list of high-wealth figures invoked by opponents as evidence of potential out-migration.
Organized opposition includes the California Chamber of Commerce, which has aligned against the measure alongside other critics who warn about impacts on investment and future revenues.
San Jose Mayor Matt Mahan has also opposed the initiative, placing a local elected official from Silicon Valley into a campaign argument often framed around tech wealth and the state’s economic engine.
Newsom’s allies have organized an allied campaign called Stop the Squeeze, reflecting a coordinated effort to build a political coalition against the initiative even as it still works through signature-gathering.
Supporters include SEIU-UHW, the sponsor that drafted the measure, and they have sought to frame the one-time levy as an equity measure aimed at extraordinary wealth rather than broader income taxes.
Rep. Ro Khanna (D-CA-17) has supported the proposal, arguing it shares prosperity, a position that adds a national Democratic voice to a fight that could become a model for other states.
For Newsom, the clash also reflects a familiar line he has taken in earlier debates about wealth taxes, and his current stance echoes prior opposition, including calling earlier wealth tax ideas “going nowhere.”
His criticism, delivered in public at the San Francisco event, focused less on the fairness argument and more on his contention that the Billionaire Tax could weaken the state’s long-term ability to fund programs.
By tying potential revenue losses to investments in schools, childcare, and public safety, Newsom placed the initiative’s effects into day-to-day services rather than abstract fiscal projections.
The measure’s designers, by contrast, have highlighted the one-time nature of the levy, a structure that seeks to avoid an ongoing annual wealth tax while still generating a large reserve for spending priorities.
That one-time design sits at the center of the policy dispute: supporters emphasize the scale of the immediate proceeds, while Newsom and other opponents emphasize what the LAO flagged as revenue risk once high-net-worth residents respond.
With the initiative still in the signature phase as Initiative No. 25-0024, the immediate political test will be whether organizers can qualify it for the November 2026 ballot and sustain public support through a campaign that will likely feature competing projections.
Newsom’s remarks underscored that he expects the measure to produce a short-lived burst, followed by a structural shift that he argues would squeeze the programs voters care about, including “education. teachers and librarians, childcare. firefighting and police.”
Gavin Newsom Warns Billionaire Tax Will Drive Wealth Out of California
Governor Gavin Newsom is campaigning against the 2026 Billionaire Tax Act, a ballot initiative proposing a one-time 5% levy on residents worth over $1 billion. Newsom warns that the tax will cause wealthy individuals to flee the state, leading to permanent revenue declines for schools and emergency services. Conversely, union backers argue the estimated $100 billion revenue is essential to offset federal budget cuts and stabilize healthcare funding.
