California Democrats clash over Proposition 40 billionaire tax

A high-stakes battle over a proposed tax on California’s billionaires has split the state’s Democratic leadership, setting progressive firebrands against moderate party heavyweights and Silicon Valley titans ahead of the November election.

The ballot measure, known as Proposition 40, would impose a one-time 5% wealth tax on Californians with a net worth exceeding $1.1 billion, retroactively applied to those living in the state as of 1 January 2026. A slightly smaller tax would hit those worth between $1 billion and $1.1 billion. Under the plan, 90% of the newly raised revenue would fund healthcare to offset federal Medicaid cuts, with the remainder split between education and food assistance.

Early polling suggests the public is receptive, though a majority is not yet secure. A recent NBCUniversal Local/Telemundo Station Group poll found 48% of likely voters support the initiative, while 38% oppose it and 14% remain undecided.

The progressive push vs the party establishment

The proposal has sparked a public civil war among prominent Democrats. Representative Ro Khanna and Senator Bernie Sanders are actively campaigning across the state to rally support. Khanna, widely seen as a potential 2028 presidential contender, has openly challenged Governor Gavin Newsom to a debate on the issue, accusing him of protecting wealthy campaign contributors.

"He doesn't want to offend some of the billionaires who he wants to finance his campaigns," Khanna said, framing the fight as a test of whether the party represents the working class or its donors.

Newsom, who is also weighing a 2028 presidential run, has emerged as the tax's most influential opponent. While his office stated that he supports a national billionaire tax focused on asset-backed loans, he has dismissed Proposition 40 as a "poorly written" measure that would harm the state’s economy. Newsom and Xavier Becerra, the Democratic candidate running to succeed him as governor, argue that the tax would trigger an exodus of top wealth creators.

Billionaires and unions fund the fight

The financial mismatch between the two campaigns is staggering. Opponents, organised under the "Building a Better California" campaign, have raised more than $252 million. The war chest is heavily funded by tech billionaires, including Google co-founder Sergey Brin, who donated $102 million, venture capitalist John Doerr ($30 million), and former Google chief executive Eric Schmidt ($27 million).

By contrast, the "Yes on 40" campaign has raised just $32.4 million, mostly from the Service Employees International Union-United Healthcare Workers West (SEIU-UHW), which drafted the measure.

The initiative has also divided organised labour. While healthcare workers are driving the proposal, groups representing teachers and firefighters have joined the opposition, frustrated that education and food programmes would receive only a fraction of the tax revenue.

Would the ultra-wealthy flee?

Opponents argue that the tax would cause a drop in future income tax revenues as the wealthy relocate. However, early polling indicates that voters are largely unfazed by this warning; 59% of respondents said they were not concerned about billionaires leaving the state.

Views among tech leaders themselves are mixed. Venture capitalist Vinod Khosla and billionaire investor Mark Cuban have strongly condemned the measure. Yet Jensen Huang, the chief executive of Nvidia, took a relaxed stance when asked about the tax, stating he chose to live in Silicon Valley and is "perfectly fine" with whatever taxes the state decides to apply.

With early voting already underway, the fight over Proposition 40 represents a broader struggle over the direction of the Democratic Party and tax policy in the United States.