One of the leading candidates for California governor is Tom Steyer.
While the self-described philanthropist/political activist/environmental advocate is focused on making California more affordable, Steyer earns skepticism over his wealth; he is a billionaire. He accumulated his fortune of an estimated $2.4 billion as a Wall Street investor and hedge fund manager.
With the primary only a few weeks away and early voting already underway, Californians will decide whether Steyer has what it takes to fill Gov. Gavin Newsom’s shoes.
Voters from the Golden State are also set to consider whether the California Billionaire Tax Act should be enacted.
Steyer hasn’t broken a sweat over this idea. In fact, he has pushed for the ultrawealthy like him to pay more in taxes, as he wrote in one Substack post. But he did have one criticism for the proposal, calling it “a temporary fix to a permanent, structural problem.”
Their proposal seeks to establish a one-time wealth tax of 5% on individuals or married couples with certain assets exceeding $1 billion.
Additionally, it would be imposed on anyone residing in California as of Jan. 1, 2026.
Chester Spatt, professor of finance at Carnegie Mellon University who served as chief economist of the U.S. Securities and Exchange Commission in the early 2000s, also raised concerns about the design.
“You’re telling people they should leave just because of the possibility that it might get adopted,” he said.
How would the billionaire wealth tax work?
National Taxpayers Union Foundation’s Andrew Wilford called the proposal “an unprecedented type of tax.”
“We’ve never had a state do something like this before,” he said.
A wealth tax is imposed on a person’s total net worth, including any assets they own — including homes, businesses and stocks — less any liabilities.
The proposal is in response to the Trump administration’s One Big, Beautiful Bill legislation, which took measures to reform medical provider tax schemes.
“States inflate their Medicaid spending to receive a larger match from the federal government,” Wilford explained.
States tax medical facilities, like hospitals, at higher rates, then those higher costs are built into Medicaid reimbursements from the federal government. The states get more tax revenue while promising the medical providers it would come out of their pockets, but federal taxpayers instead.
“The mechanics of it are sort of complicated, but the end result is that states are able to receive a larger match from the federal government without actually really spending anything more,” Wilford said.
The One Big, Beautiful Bill tried to reduce the amount states can tax and then ask for back, resulting “in California being set to receive a lower federal Medicaid match,” added Wilford. The one-time billionaire tax seeks to fill in that gap.
Service Employees International Union-United Healthcare Workers West, a labor union for healthcare workers in California, launched a ballot initiative ahead of the November 2026 election cycle.
SEIU-UHW submitted 1.55 million signatures on April 27 to qualify for the ballot.
“The immense and growing fortunes of billionaires bring privileges inaccessible to most. Whereas nurses, teachers, firefighters, and tech workers alike pay taxes on nearly all of their earned income, billionaires can shield enormous sums from taxation,” the initiative states. “Their primary assets — stocks, businesses, real estate — grow in value year after year, but because this growth is taxed only at sale and billionaires often need not sell, they pay no tax on their rising fortunes.”
It’s worth noting that this isn’t the first time SEIU has backed such an idea. The national organization also endorsed Massachusetts Sen. Elizabeth Warren’s Ultra-Millionaire Tax Act, which is an annual wealth tax, as well as Vermont Sen. Bernie Sanders’ Medicare-for-All funding proposals. Neither bill advanced in Congress.
The proposal is already leading to migration out of California
Wilford argued that the retroactive nature of the billionaire tax is “almost certainly unconstitutional.”
Although the clause was envisioned as a way to prevent billionaires from avoiding the tax, “we’ve already seen several California billionaires leave.”
“The supporters of this are saying they’ll raise $100 billion in revenue,” said Wilford before noting that the number is too high.
“The original measure assumed that no one would leave,” said Wilford. But one study from March found that public departures of certain billionaires from California will end up resulting in $24.7 billion less in tax revenue for the state over time because of the wealth tax, erasing any possible gains from the wealth tax.
Wilford said it’s worth noting there are many high-net-worth individuals who are leaving the state and moving their assets not as loudly as the likes of former Google CEO Larry Page and former CEO of PayPal Peter Thiel. These are permanently lost streams of revenue for the state.
According to Open Secrets, a handful of billionaires — the high-earning executives from Silicon Valley’s biggest companies, like Affirm, DoorDash, Google, Palantir, Ripple and Stripe — have raised more than $120 million to defeat the billionaire wealth tax initiative. Most notable is the contribution from Google co-founder Sergey Brin, who donated $66 million to the Building a Better California political action committee.
Wilford added that the tax rate of 5% is “quite high,” even compared to the few European countries that levy a wealth tax rate, with Spain’s charting as high as 3.5%.
California loses a resident on net every 2 minutes and 37 seconds based on recent IRS migration data, according to the National Taxpayers Union Foundation’s reporting. The state also lost about $4 billion in state and local revenue.
“California politicians sometimes allude to this a little bit quietly because they don’t like to admit this,” noted Wilford. “But … the tax base is getting smaller” as people opt to move to states like Texas and Florida with no income tax.
“We’re seeing these tech entrepreneurs that are starting to say, ‘Hey, do I really need to be in Silicon Valley?’” Wilford said.
He also noted that California taxes the wealthy more than any other state in the country, with a 14.4% top income tax rate.
Spatt said California’s already high taxes add to its uncompetitiveness as of late.
“They have one thing to sell, which is the weather. But there’s a limit, there’s even a limit to that,” he said.
“California needs to focus on some of the ways it’s spending money, whether it’s for railroads that they haven’t laid a piece of track,” noted Spatt.
Meanwhile, this proposal doesn’t solve any of Golden State’s spending problems, he said.
“The claim is that this is the fund for Medicaid shortfalls, but these are annual shortfalls. The claim is that this is going to be a one-time tax. Now, how do you fund annual shortfalls with a one-time tax?”
The national conversation around the billionaire tax
The proposal has raised questions about California’s credibility.
The wealth tax also came up under the Biden administration. His 2025 budget proposal aimed to impose a 25% wealth tax on households that earn $100 million or more, hike the Medicaid tax rate on individuals earning $400,000 or more, and increase the corporate tax, as the Deseret News previously reported.
But, Spatt pointed out, there’s a greater chance of pulling off a wealth tax on a federal level since the high-earner would have to leave the country to avoid the tax.
“It’s a lot easier to just move out of California.”
The idea of a wealth tax has been floated in other states but none of them are close to making it to the ballot.
Jeff Burton, a Republican strategist and a founding partner at Maven Advocacy Partners, said that for decades, the trend has been that where California goes, part of the nation goes too.
The issue of a wealth tax goes beyond the Golden State. If it passes, it signals to progressives that it’s possible for other states, added Burton, who previously served as the deputy executive director of the National Republican Congressional Committee.
Burton added, “It’s going to end up being a fight nationally that occurs in California first.”