Newsom Calls for Federal Billionaire Tax While Opposing California’s Prop. 40

Governor Gavin Newsom announced he will oppose California’s Proposition 40, a ballot measure that would impose a wealth tax on billionaires, arguing instead that taxing extreme wealth should be done at the federal level. The measure will appear on the November ballot after negotiations to withdraw it collapsed before Thursday’s deadline.

In a Substack post published Friday, Newsom outlined a vision for a federal tax on billionaires and those worth more than $100 million, changes to inheritance rules, and closing tax loopholes that allow wealthy people to borrow against their assets. He did not propose a specific tax rate or detail how the federal levy would work.

“It is time for a national billionaires’ tax,” Newsom said. “The fight belongs at the federal level, where this broken system was created in the first place.”

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The California measure, proposed by the union SEIU-UHW, would levy a one-time 5% tax on a billionaire’s total net worth — including art collections, company stock, and other assets — raising as much as $100 billion. The union initially floated the idea in October as a way to backfill anticipated federal cuts to healthcare funding.

Newsom had reportedly given private assurances to wealthy donors that he expected to negotiate the measure off the ballot. Those talks failed. Dave Regan, SEIU-UHW’s president, said the union held “a couple of cursory conversations with the governor, but they made it clear they were not going to entertain anything that affected billionaires and we just think that’s wrong.”

Last week, the union tried to salvage negotiations by lowering the proposed tax rate from 5% to 2%. Newsom immediately rejected the offer.

The decision sets up what Democratic strategist Steven Maviglio called “the World War Three of politics,” with some of the world’s richest people prepared to spend millions to defeat the measure. Google co-founder Sergey Brin, the world’s third richest person who has moved to Nevada, has already spent more than $80 million funding a group that’s backing other ballot measures designed to nullify the wealth tax if any of them receives more votes than Proposition 40.

“We are ready to defeat this convoluted nightmare of a measure in November,” said a spokesperson for Golden State Promise, a group backed by billionaire Chris Larsen.

The opposition coalition includes Planned Parenthood Affiliates of California and several labor unions who argue the tax proceeds would benefit only certain groups while potentially damaging the state’s budget by driving away wealthy residents. A coalition linked to doctors and school boards called the tax a threat to “vital funding for education and schools, healthcare and clinics, public safety, and infrastructure projects.”

Vermont Senator Bernie Sanders and Silicon Valley Representative Ro Khanna both support the measure. Khanna said Elon Musk’s status as the world’s first trillionaire underscores the need to tax the rich, calling concerns about capital flight “hogwash.”

“If you’re opposed to this tax, you’re on the side of trickle-down economics,” Khanna said. “You’re protecting the very, very rich as opposed to standing up for the working class.”

A May poll from the Public Policy Institute for California found the tax is supported by 54% of likely voters, though San Francisco voters more recently rejected a proposal to increase taxes on large businesses with highly-paid CEOs.

The Breakdown

• Proposition 40 would impose a one-time 5% tax on the net worth of California billionaires, including assets like art, stock, and real estate, raising an estimated $100 billion.
• Governor Newsom opposes the state measure and instead calls for a federal billionaire tax, changes to inheritance rules, and closing loopholes that let wealthy people borrow against assets without triggering taxes.
• Billionaire-backed groups have already spent more than $80 million on competing ballot measures designed to nullify the wealth tax if they receive more votes than Proposition 40.
• The measure was proposed by SEIU-UHW in October to replace anticipated federal healthcare funding cuts; the union says Newsom refused to negotiate any version affecting billionaires.

What This Means for You

California voters will decide Proposition 40 in November — a direct vote on whether the state should tax extreme wealth. If the measure passes, it could become a national template; if it fails, it could set back similar efforts in other states. The outcome will signal how much political will exists for redistributing wealth from the very top.

What You Can Do

Proposition 40 will appear on the November ballot. If you’re registered to vote in California, research both the measure itself and the competing anti-wealth-tax ballot initiatives that billionaire-backed groups are funding to nullify it — the measure that receives the most votes will take effect if multiple versions pass.

What to Watch

Some of the world’s richest people are prepared to spend millions to defeat the measure, with Sergey Brin already committing more than $80 million to fund competing measures. That level of spending doesn’t happen unless the people writing the checks believe they have something real to lose — in this case, potentially billions in one-time tax liability.

One substantive question: what happens if wealthy residents simply leave California before the tax takes effect? The opposition says capital flight is a real threat that would damage the state budget; supporters call that “hogwash.” Voters are being asked to decide which prediction is right.

Newsom is considering a presidential run in 2028. His opposition to Proposition 40 while proposing a federal wealth tax raises the question of whether a federal version — which has never advanced in Congress and faces serious constitutional challenges — is a genuine policy goal or a way to avoid taking a hard position on this ballot measure.