Bernie Sanders, hero of the American left, is 85 years old now but was on fiery form speaking to hundreds of his most devoted fans in San Francisco earlier this month, savaging greedy billionaires while spitting out statistics about a growing gap between rich and poor.

“Over the last year, after receiving the largest tax break in history, fewer than 1,000 billionaires – fewer than the people in this room – became over $2.2trn dollars richer,” he thundered to rapturous applause in the city’s historic Curran Theatre.

The veteran senator from Vermont and former Democratic presidential candidate pointed out that one man – loud boos greeting the name of Elon Musk – owns more assets than the combined wealth of more than half of his nation’s poorest citizens. “The greed and arrogance of the billionaire class is really extraordinary,” said Sanders, claiming that the “oligarchs” are doing better than at any previous time in American history and making “more money than they can spend in 1,000 lifetimes”.

He contrasted their surging wealth with millions of families struggling to pay their daily bills for food, fuel, healthcare and housing. “People all over California and the country are asking the same question: how many bloody mansions do you need? How many yachts do you need? How many private jets and islands do you need?”

Now the people of California can answer this question. For the reason Sanders was speaking at the rally was to whip up support for a vote on 3 November with seismic possible implications for the intensifying debate around the world over wealth taxes – including in Britain. Among 14 plebiscites on California’s ballot in the mid-term elections is Proposition 40 – a one-time levy of five per cent on the wealth of billionaires intended to alleviate hefty healthcare spending cuts imposed by Congress last year to fund tax breaks.

This proposal, put forward by a union boss, targets about 250 people in the home of Hollywood and Silicon Valley. California alone has more billionaires based in its sun-dappled mansions than any country in the world apart from China. Critics argue it is a flawed idea that will end up raising less revenue for the state as rich entrepreneurs join an existing exodus from high-tax California to lower-tax states such as Florida and Texas, taking jobs and spending power with them.

Billionaires fight back

Mark Cuban, the billionaire investor and ex-star of America’s version of Dragons’ Den, believes only “idiot” start-up founders will stay in California if it passes. “The minute entrepreneurs believe they will see their net worth could qualify them for the tax, they will relocate to Dallas,” he told me.

Evidence from abroad – especially in countries such as Spain and Switzerland that have smaller regional wealth taxes – backs his case. But Sanders and his allies insist they will push for a national follow-up – exposing deep divisions in the Democratic Party between his resurgent hard-left camp and moderates such as California Governor Gavin Newsom, who opposes the measure, amid midterm elections so crucial for the party’s revival and fightback against Trump. 

Some billionaires are spending huge sums to thwart this raid on their riches – led by Sergey Brin, the Moscow-born co-founder of Google, who has chipped in more than $100m to defeat a measure he compares to the Soviet system his family fled. Prop 40 might force Brin to hand over at least $13bn – although he hopes to evade the levy after shifting his main residence to Nevada ahead of the 1 January cut-off, designed to stop any flight of billionaires after the vote. Google co-founder Larry Page has moved to Florida, buying two homes in Miami for a reported $173m.

“This is a crossing of the Rubicon since it’s not a tax – it’s an asset grab,” one tech start-up veteran, founder of three companies, told me. “It’s the thin end of the wedge – the one they can sell at first. So I’m not on Team Bernie.” 

This issue is stirring strong passions, with several people attending the Sanders rally telling me it was the first political event they had attended. “I want to hit billionaires because there is so much income inequality,” said Deborah Suslovic, 70, who worked as an executive assistant in tech before retirement.

Graham Norwood, 45, a therapist, went with his guide dog Malcolm. “Wealth and income inequality in America is out of control. We keep handing out more and more payouts to the rich but middle class income has stagnated for 40 plus years.”

Sonya Allen-Smith, a healthcare technician 20 years, said she worried about services being cut, especially since her elderly mother is undergoing treatment for cancer. “Why not pay your fair share when you are making billions of dollars?” she asked. “Where is their humanity?”

The man behind Prop 40 is Dave Regan, president of the 125,000-member SEIU-United Healthcare Workers West union, which represents lower-paid staff in clinics and hospitals. Regan, who has filed scores of previous ballot initiatives, said he put up the idea after Donald Trump signed his “Big Beautiful Bill” last July, leading to huge healthcare cuts that threaten to leave 3.5 million people without coverage and trigger 150,000 job losses.

“That was done so President Trump could finance yet another tax break for the wealthiest Americans – a permanent tax break – so taking this issue to the voters was the only path left to avoid this catastrophe,” said Regan. “Billionaires in California pay far less in tax rates than nurses, teachers, construction workers. They pay less than one per cent – it’s a scandal and absolutely outrageous. We overtax work and substantially undertax wealth. Why should Sergey Brin pay one thirtieth of the rate that I pay in taxes? How does that make sense?”

A community divided

After speaking to him, I drove an hour from San Francisco to Atherton – the USA’s richest town, sitting in the heart of Silicon Valley, where the median cost of a home is almost $10m and average household incomes are more than half a million dollars. Unsurprisingly, I found critics of Prop 40. One tech veteran in his sixties dismissed it as “a populist hat-trick”. A woman outside the town’s plush library said it sent the wrong message by targeting people who were “seeding the forest with money, jobs and technology.”

I spoke from there to Steve Hilton, the former adviser to David Cameron who is the Republican candidate to succeed Newsom as governor. “It’s a ridiculous, insane proposal that almost all serious people think is ridiculous and insane,” he said. Hilton insists Prop 40 is already driving away billions of dollars in tax from California – a claim I heard supported by prominent economists.

“It’s the most self-destructive proposal,” he said. “Any governor would do anything in their power to stop it. The backers are just pushing their own narrow self-interest, pumping themselves up as anti-Trump fighters. What they’ve actually done is hurt working people in California who are seeing huge sums removed from services they rely upon.”

Yet even in Atherton – amid lovely oak-lined avenues filled with the huge mansions – I found passionate supporters of Prop 40. “I’m voting for it because billionaires should pay tax – it’s as simple as that,” said Gracie Dorrance, 36, history professor at a community college and a mother of three. “Of course it makes me angry – we are middle-class, trying to survive, living paycheck to paycheck, while the billionaires are getting away with everything.”

Dorrance was born and raised in a neighbouring town – and as she said, you see a very different demographic just up the road. The trees and lush gardens disappear and you find yourself suddenly in a scruffy enclave with car repair shops, taquerias and houses crammed with multiple families, many from migrant backgrounds. And this stark divide – one town studded with billionaires beside another filled with the people who clean their homes, tidy their gardens and fix their cars – symbolises the fierce debate over how best to tackle the growing gulf between rich and poor.

“It is probably the only thing I’ve seen recently that is going to effectively tax the super-rich because income tax is not the same across the board,” said Katherine Harty, 31, a tech worker whom I met walking with her new baby and cousin by the beach. “All our friends agree. People are getting angrier as their cost of living gets more expensive and they are getting pushed out of their cities.”

Ballot too close to call

Even some critics who oppose Prop 40 accept the need to confront this spiralling wealth gap.

Fabio Natalucci – a former senior official at the International Monetary Fund and Federal Reserve who now heads the research arm of a tax advisory firm – opposes the idea on the grounds that it is unlikely to be a one-off, and that even its threat has had adverse economic repercussions, leading to the loss of about $500bn in California’s tax base, he says.

 “The tax has already resulted in a large exodus of wealthy residents. And I don’t think the statement that it is a one-time tax is credible – it seems very likely it would be reimposed again at some point. Politically, this would be just too appealing,” he adds.

Yet he warns also of the dangers in failing to tackle inequality and fuelling political extremism, accepting that smaller and wider wealth taxes might be part of the solution along with public spending cuts. “At the end of the day, society is a social contract. If social cohesion breaks down because people are angry, people feel no equity in the economy, people feel policies only benefit a small group, then society will not keep together.” 

Prop 40 divides Democrats. The Californian state party backs it, but Newsom – widely expected to run for the White House – opposes it due to restrictions on how revenues can be spent that ignore key public services beyond health and education. He, however, does add that he understands the “anxiety” driving a wealth tax proposal. Xavier Becerra, the Democratic candidate to succeed Newsom as governor, also opposes it.

The left pour scorn on their stance, accusing them of sucking up to billionaires to win campaign funding. “Are we going to stand with 250 billionaires in California or the poor kids needing health care?” asked Ro Khanna, a progressive congressman for the state also rumoured to be planning a tilt at the presidency.

Pollsters predict a close result over Prop 40, with Yes leading but slipping after an advertising blitz funded by billionaires. The No camp is outspending its rival at least fivefold – and has put two more Props on the ballot to confuse voters and negate the plan, one of which bans any new taxes on personal property.

One veteran California polling expert I spoke to, however, made the comparison with Brexit, warning they could be surprised by a groundswell of public disgruntlement upsetting forecasts – although even if the proposition passes, experts predict a barrage of legal challenges and intense haggling over the size of billionaires’ assets.

Global implications

Only a few countries have wealth taxes – although even in rich Norway, where about one in eight people pay a levy of about one per cent, it is claimed that 100 of the nation’s 400 richest citizens have left to avoid it. Other nations such as Sweden scrapped such taxes, admitting they drove out entrepreneurs after Ikea founder Ingvar Kamprad and tennis champion Björn Borg joined the flight abroad. 

History shows wealth taxes are imperfect measures in a world of easy mobility, especially for the super-rich. Yet Brazil pushed the idea of a two per cent levy on billionaires when hosting the G20 in 2024, and this idea has grown fashionable on the global left, including in Britain. Green Party leader Zack Polanski has backed the Brazilian idea while former Labour leader Neil Kinnock and Cabinet minister Louise Haigh, seen as Andy Burnham’s effective deputy, demanded wealth taxes last year.

The inspiration for both Brazil’s idea and Prop 40 is Gabriel Zucman, an expert on wealth inequality and professor at the University of California, Berkeley; and at Paris School of Economics. He believes there must be a new form of taxation to stop the super-rich manipulating fiscal systems to their own advantage. “If Prop 40 passes it’s likely to be imitated by other US states, ultimately paving the way for a US federal wealth tax, and inspiring many countries around the world,” said Zucman. “It could well usher in a revolution in global tax policy.”

He argues that such taxes can complete the “unfinished revolution” that began more than a century ago to create the progressive income tax systems that form the basis of modern societies. Certainly the stakes are very high as Californians vote on targeting their billionaires on a measure that has potentially global implications.