California votes on Prop. 40, a first-in-US billionaire tax to fund healthcare cuts. Backers see a national model; critics warn the wealthy will leave the state.
LOS ANGELES: When Americans vote in next month’s midterm elections, one question on the ballot in California could echo far beyond the state: should the ultra-wealthy pay a special tax on their fortunes?
The proposal would require California’s roughly 200 billionaires to hand over five percent of their net worth that will mostly be used to fund the public healthcare system gutted by President Donald Trump, and on which around half of Californians depend.
Advocates hope the move would set a precedent for other parts of the country at a time of rising anger over surging inequality in the United States, as the fortunes of tech titans like Elon Musk reach eye-watering levels.
Loren Fierman, a retired graphic designer who relies on Medicare — the public program that provides healthcare for retirees and the disabled — said the money would barely register for the mega-rich.
“It’s like a drop in their bucket,” she told AFP.
“It means very little to them, but it means everything to people that need healthcare.”
Opponents of the ballot measure, including Google co-founder Sergey Brin, have stumped up more than $205 million to defeat so-called Proposition 40, arguing it will push the wealthy to leave California, reducing the amount of tax the state can raise.
“No” campaign commercials, which play wall-to-wall across TV stations in California’s expensive media market, offer doom-laden predictions that Prop. 40 is the thin end of the wedge.
“The concern is that individuals, business owners and such will anticipate that it likely will be repeated,” said Kirk Stark, a tax law professor at the University of California, Los Angeles.
It is not only the billionaires who are voting against the plan.
Outgoing Governor Gavin Newsom, who is widely expected to make a run for the White House in 2028, has said he will vote no.
United Domestic Workers, a union representing 250,000 home care and child care providers, is also urging its members to vote no, arguing that the one-time tax is no way to plug multi-billion dollar holes in the state’s budget.
$100 billion
The idea is not new: California has previously voted three times this decade on a wealth tax, rejecting it every time.
While the measure was popular when it was first launched, polls show support is now slipping.
But firebrand left-wing Senator Bernie Sanders, who was campaigning for the measure this month, said it was time to make the rich pay their fair share.
“While these billionaires more than tripled their wealth over the past decade, they paid a lower effective tax rate than a plumber or a nurse,” he told cheering supporters in Los Angeles.
Brian Galle, a law professor at the University of California, Berkeley, who helped author the bill, said without the estimated $100 billion the measure would raise, households will have to find an average of $7,500 more over the next few years to fund healthcare, thanks to reductions in federal cash.
Galle says the cuts to public programs under the Trump administration will be keenly felt outside of the cities, where people are more likely to rely on Medicaid, a government-funded program for the poor and disabled.
“When a rural hospital closes, it very rarely opens again,” he said.
‘What is the loss?’
With inequality uppermost in many voters’ minds as America hurtles towards the November 3 midterms, advocates for Prop. 40 hope that California might offer inspiration for other parts of the country.
“If the one in California succeeds, I predict that you will see similar initiatives in other states,” said UC Berkeley economist Emmanuel Saez, who also helped draft the text.
Saez acknowledged that if the tax were renewed or made permanent, some billionaires might think twice about staying in California.
But for retired caregiver Tim Moffet, warnings of an exodus ring a little hollow.
“They’re not paying anyway,” shrugged the 69-year-old. “So what is the loss?”