The Battle to Pass a Billionaire Tax
It wasn’t so long ago that Silicon Valley was, to use its own language, a major node in the Democratic Party’s network. The Valley’s origins were in developing electronic equipment for corporations and the military, but with the dawning of the age of the personal computer, half a century ago, it began to adopt the vernacular of anti-organizational hippie culture. It seemed entirely appropriate that a canonical text of the early internet, “A Declaration of the Independence of Cyberspace,” was written by a Grateful Dead lyricist, John Perry Barlow. For a time, the PC, the internet, and social-media networks all seemed to be vehicles for personal liberation and grassroots political empowerment. The first two Democratic Presidents during the Valley’s apotheosis, Bill Clinton and Barack Obama, presented themselves as technology-friendly futurists, and the Valley supported their campaigns and helped staff their Administrations.
Things have changed. The Valley has, for many people who live there, gone from a white-collar paradise to a locus of high-stress workaholism and unaffordability. Its formerly liberal-seeming titans put on suits and ties and dutifully lined up on the dais at Donald Trump’s second Inauguration. Elon Musk, the man who introduced Americans to electric vehicles, spent the early months of 2025 as an agent of destruction within the federal government. Earlier this year, he became the first person with a net worth of more than a trillion dollars. In August, Mark Zuckerberg, of Meta, signed off on a settlement with forty-seven states and the federal government totalling as much as seventeen billion dollars, in a case about the harms that his social networks are inflicting on children and teen-agers. Across the country, candidates from both parties are campaigning against the construction of data centers powering the artificial-intelligence boom—which is another source of national anxiety about Big Tech.
I recently met with Bruce Cain, a political scientist at Stanford, at a restaurant in Woodside, a lovely small town not far from the tech companies’ headquarters, where the median price of a house is around four million dollars. “California had a love affair with the technology companies,” he told me. “It wasn’t just Steve Jobs. It was Musk, too—people fell in love with the Tesla. There was a romantic belief that they were going to do good, that if we got rid of all the rules we could create a new society where everything would be perfect. There was a naïveté, and a feeling that you could make money and do good at the same time. For the last five years, it’s been clear that’s not working. I don’t know anybody driving a Tesla who isn’t ashamed.”
Cain went on, “What happens to lovers who get betrayed? They get angry.” One consequence of this disillusionment is that, on November 3rd, Californians will vote on Proposition 40, a ballot initiative that would impose a one-time, five-per-cent wealth tax on billionaires, which is understood to be aimed principally at Silicon Valley executives. If the measure passes and goes into effect, which is far from a sure thing, it will amount to the first time that a government in the U.S. has successfully taxed the assets, rather than the income, of extremely rich people as a class. The initiative’s authors have estimated that the tax would fall on as few as two hundred people and would generate a hundred billion dollars in revenue for the state. This is a fairly sleepy election year in California—Xavier Becerra, a Democrat, is cruising to an easy win in the governor’s race, and only three of the state’s fifty-two congressional districts are competitive—but Proposition 40 is a spectacular exception. It is likely to be among the most expensive political fights this year, with spending, mostly against the initiative, running well into the hundreds of millions of dollars. Several of California’s best-known tech billionaires, including Peter Thiel and the founders of Google, Sergey Brin and Larry Page, have already left California, partly in anticipation of Proposition 40, and they have been warning that many of their peers will follow. This campaign may be the purest policy manifestation of a left-populist energy that has been on the rise for years, and has recently started to produce more electoral victories. And it will make wealth taxes an unavoidable topic in the 2028 Presidential race—by which time Anthropic and OpenAI will likely have gone public, creating a new cohort of highly visible billionaires. Last month, six Nobel Prize-winning American economists issued a statement in support of Proposition 40, saying that it “may well come to be seen as a turning point in the battle between democracy and oligarchy.”
In politics, large forces build up over time, but specific events can arrive suddenly and unexpectedly. Two years ago, nobody was predicting Proposition 40, and now it’s here, a big, glorious mess. Although the father of the proposal, Dave Regan, is the president of a union, the labor movement is bitterly divided over the effort. Very few Democratic elected officials, and no Republicans, have endorsed the initiative. Governor Gavin Newsom, who is term-limited and a presumed Presidential candidate, is a major opponent. And other Democrats who are thinking of running for President in 2028 are likely watching the Proposition 40 drama nervously. Most Democratic voters say that they favor higher taxes on billionaires. But, if California is any indication, proposing a wealth tax will alienate the tech donors who have been crucial to the Democrats’ ability to compete with Republicans in some races. There is no obvious way to escape this dilemma.
People often talk about our times as a second Gilded Age. During the first—the term was coined by Mark Twain and Charles Dudley Warner to describe the rise of industrial fortunes after the Civil War—the country had, by modern standards, a very small national government and very low taxes. In 1879, a social reformer named Henry George published a book called “Progress and Poverty,” which argued for remedying the era’s excesses by replacing all existing taxes with a single tax on land, which was a main form of wealth at the time. The book sold three million copies in the United States during the eighteen-eighties and nineties—more than any other book except the Bible—and double that worldwide. In Britain, “Progress and Poverty” outsold Shakespeare. In 1886, George ran for mayor of New York City and got thirty per cent of the vote, finishing ahead of a young Theodore Roosevelt.
Instead of imposing a wealth tax, Congress passed a national income tax, in 1894, but the Supreme Court deemed it unconstitutional. (A clause in Article I says that “direct Taxes shall be apportioned among the several States which may be included within this Union, according to their respective Numbers,” which the Court interpreted as a ban on the federal government, as opposed to the states, taxing individuals.) Establishing the federal income tax required a constitutional amendment: the Sixteenth, which was ratified in 1913, at the height of the Progressive Era. “In terms of the federal government’s operations, the Sixteenth Amendment was the most dramatic change in the written constitution in the nation’s second century,” the Yale historian Mark Peterson writes in his new book, “The Making and Breaking of the American Constitution.” It shifted economic power from state governments to Washington and created a stream of revenue that, over time, would fund expansions of the federal government which the Progressives had dreamed of, namely regulatory agencies to curb business excesses, along with social-welfare programs for the elderly and the poor.
But it wasn’t simply a desire to expand the government that drove the creation of federal taxes; it was also a straightforward urge to make wealthy rentiers less wealthy. Theodore Roosevelt, in a speech in 1910, when he was preparing to run for a third Presidential term, declared, “No man should receive a dollar unless that dollar has been fairly earned. Every dollar received should represent a dollar’s worth of service rendered—not gambling in stocks but service rendered. The really big fortune, the swollen fortune, by the mere fact of its size, acquires qualities which differentiate it in kind as well as in degree from what is possessed by men of relatively small means.” The effect of the early federal income tax was similar to that of a wealth tax. At first, only the top two per cent of households paid it, and much of their income was produced by their wealth, in the form of stock dividends, not their labor. In 1916, three years after the advent of the tax, Congress established a federal estate tax—in effect, a tax on the transfer of wealth from parents to children.
Throughout most of the twentieth century, taxes rose and the government grew. The tide began to turn with another momentous California ballot initiative—Proposition 13, in 1978, which severely limited property taxes. Ronald Reagan, who by then had been out of the governorship for a few years, picked up on the tax-cutting idea and made it central to his 1980 Presidential campaign. When he arrived in Washington, he initiated a practice of Republican Presidents beginning their terms with a substantial income-tax cut. In subsequent decades, Congress enacted a series of major reductions to the estate tax. For years, Democratic candidates were terrified of being accused of wanting to raise taxes.
In this century, the rise of concentrated wealth, economic precarity, and populist sentiment has changed the atmosphere. Back in 1959, in what’s thought to be one of the first precise calculations of the distribution of wealth in the United States, the economist Robert Lampman found that, six years earlier, the top one per cent of adult wealth holders—those who had at least sixty thousand dollars in assets—had accounted for twenty-four per cent of national wealth, and that their share had fallen considerably since the nineteen-twenties. Inequality began accelerating again in the late seventies, and the amount of assets in the hands of the top one per cent increased dramatically. Today, that group, made up of those with more than eleven million dollars in net wealth, holds thirty-two per cent of national wealth. Just the top tenth of one per cent hold fifteen per cent of national wealth, amounting to twenty-eight trillion dollars.
The Occupy movement, which began in 2011, focussed on the top one per cent as a target. Two years later, the French economist Thomas Piketty, in his best-selling book “Capital in the Twenty-First Century,” proposed a wealth tax, along with much higher top income-tax rates, as the only way to reverse growing inequality. In 2016, Senator Bernie Sanders shocked the Democratic establishment by running a close race against Hillary Clinton for the Party’s Presidential nomination, thanks to his insistent focus on income and wealth inequality. In 2018, Emmanuel Saez and Gabriel Zucman, economists at the University of California, Berkeley, who have close ties to Piketty, and David Gamage, a former Berkeley law professor, began working with Senator Elizabeth Warren on a wealth-tax proposal for her 2020 Presidential campaign: a two-per-cent annual tax on all personal wealth above fifty million dollars. Sanders, who was running for President again, soon offered a version of his own, with a lower threshold, of sixteen million dollars.
What was distinctive about these ideas was not only that they were wealth taxes; it was also that they limited the scope to a small number of very rich people, in recognition of the enormous growth in big fortunes, especially in Silicon Valley. Many of the new billionaires largely avoid income taxation because, technically, their pay is minimal; Page and Brin both have base salaries of a dollar a year. Their stock in Alphabet, Google’s parent company, won’t be taxed unless they sell it. They can borrow against those holdings, and that money isn’t subject to income tax. The billionaires’ exploding wealth made it plausible that governments could significantly increase revenues by imposing new taxes only on them, and these figures’ declining popularity made such policies seem politically possible. It was a sign of where things were moving that Sanders, between his 2016 and 2020 Presidential campaigns, recast the standard foils of his rhetoric, speaking of billionaires rather than millionaires.
After Warren’s Presidential campaign ended, Saez, Zucman, Gamage, and two other law professors—Darien Shanske, of U.C. Davis, and Brian Galle, of Berkeley—began working with other politicians and interest groups that wanted to propose wealth taxes. Since 2020, they have consulted on proposals in states including Washington, New York, Illinois, and Vermont. They helped draft a proposal from Joe Biden to tax the unrealized capital gains of the richest Americans and a similar proposal from Senator Ron Wyden, of Oregon. They also worked on several recent attempts to pass a wealth tax in the California legislature. In 2024, G-20 leaders, with Zucman’s help, launched a discussion about wealth taxation, and in response there has been activity in several countries, such as Brazil, Spain, France, Belgium, Britain, and the Netherlands. None of these efforts have resulted in policy changes yet. Proposition 40 might.
Dave Regan, the president of Service Employees International Union-United Healthcare Workers West, doesn’t come across as a member of what Thomas Piketty calls the Brahmin left. A bluff, tough sixty-year-old with a full head of white hair, he is the son of a homicide cop from Buffalo and spent the early stages of his career presiding over a Rust Belt local. In 2009, the national head of the S.E.I.U., Andy Stern, sent Regan to California.
When I went to see Regan, in Sacramento, he told me that when he arrived in the state he felt as if he’d spent his whole life watching the labor movement sink. “We’ve been on defense the whole time,” he said. “Our policy prescriptions have been very tepid. And it gets worse and worse. We’re at the point where incrementalism will not work. What can we do at a meaningful scale?” California’s particular form of direct democracy, he began to realize, offered an opportunity.
In 1911, California created its ballot-initiative system. Like the income tax, it was a Progressive Era reform meant to curb the power of the rich—especially the railroad barons, who effectively controlled the state legislature. The ballot system, which was approved via a special election, allowed anyone who mounted a successful signature-gathering campaign to put a policy proposal before the state’s voters. Regan found that, a hundred years later, it was still difficult to get labor-friendly measures through the California legislature, so he became an aggressive proponent of ballot referendums, sponsoring thirty-eight successful initiatives in the past ten years. Regan’s detractors complain that he uses referendums as a bargaining tactic, hoping that the threat of a union-friendly initiative passing will persuade a company to offer concessions. The system allows those who propose initiatives to withdraw them before Election Day. This year, for example, Regan dropped an initiative that would have restricted hospital executives’ pay, in exchange for the California Hospital Association not imposing new administrative hurdles on unions pursuing political campaigns.
Another knock on Regan is that he spends a lot of union resources on these campaigns. A proposed initiative has to get almost nine hundred thousand signatures to appear on the ballot, which can cost nearly twenty million dollars, much of which goes to signature-gathering firms. Critics also say that Regan’s initiatives are often designed to help only his union, not labor as a whole. “Dave has never tried to build coalitions,” Jim Araby, a veteran California labor organizer who left Regan’s union after Regan arrived, told me. Sometimes Regan makes a hard run at a single industry—he focussed on dialysis firms in three recent failed initiatives—which risks bringing a new, well-resourced conservative player permanently into California politics, in ways that threaten the interests of other unions.
Following the Reagan tradition, Trump began his second Presidential term by proposing enormous reductions in spending and taxes. Congress passed the One Big Beautiful Bill Act by thin margins. Trump signed it on July 4, 2025. To help pay for its tax cuts, the act reduced Medicaid payments by a trillion dollars over the next decade, though it was designed to delay the full impact of the cuts until 2027, after this year’s elections. Fourteen million Californians are on Medicaid, and, owing to the act, many of them will not be able to receive care at private hospitals; they will have to go to public-hospital emergency rooms. Regan’s union represents a hundred and twenty thousand workers in private hospitals and clinics, so the cuts would have a devastating effect on them.
Last summer, Regan got in touch with Saez to ask whether his team of academics could help draft a wealth-tax initiative, to provide emergency funds that could forestall the effects of the federal Medicaid cuts. It had to be done quickly, because the ballot initiative that Regan had in mind would have to go through an elaborate series of steps in order to appear before voters in November, 2026. In the world of wealth-tax proposals, there are a few essential variables. What’s the level of wealth below which people won’t be taxed? What’s the rate? How long will the tax be levied? While Saez and his team calculated how much revenue various answers to these questions would produce, Regan commissioned polls to test the popularity of several different options. The result was a one-time, five-per-cent tax on fortunes of at least a billion dollars, payable over five years, with ninety per cent of the estimated hundred billion dollars in proceeds directed toward restoring health care threatened by Trump’s cuts. Regan and his team finished drafting the initiative and began investing union funds in signature-gathering. That got the immediate attention of Proposition 40’s intended targets.
During the summer, the San Francisco Standard, a nonprofit news site, got hold of material from a Signal chat that a group of billionaires had formed to discuss the ballot measure. The participants included Sergey Brin; Chris Larsen, of the cryptocurrency company Ripple Labs; and the venture capitalists Marc Andreessen and Michael Moritz, the Standard’s main funder. One idea that came up in the chat was buying a signature-gathering firm that Regan had hired, in the hope of stopping the initiative. Someone who has seen these messages told me that another theme in the chat, which disbanded in January because its members had begun to quarrel, was an impulse to expand into broader anti-labor activities.
The billionaires turned their energy and resources to starting organizations to defeat Proposition 40. The most important of these was Build a Better California, funded mostly by Brin. As of late summer, he had given the group a hundred and two million dollars, and several other billionaires (such as Moritz, the former Google executive Eric Schmidt, and the venture capitalist John Doerr) had also given it millions. Larsen started Golden State Promise, and Ron Conway, also a venture capitalist, helped start Stop the Squeeze. These groups are financing campaigns against Proposition 40, and Build a Better California is also backing Propositions 41 and 42—two newer initiatives that, if passed, could nullify the wealth tax.
The billionaires usually let the organizations that they bankroll speak on their behalf, but some of them have made specific policy arguments against Proposition 40. The most obvious one is that a wealth tax will lead billionaires to flee the state. In May, the Financial Times ran an essay by Moritz titled “In America, Wealth Taxes Mean Wealth Flight.” Moritz told me that he personally doesn’t plan to leave if Proposition 40 passes. “Age has something to do with it,” he said. Moritz is seventy-two. “If I were a really successful thirty-five-year-old, I might be making a different decision.”
Another argument is that much of the billionaires’ wealth is in the form of stock in tech companies, which can’t plausibly be converted to cash without damaging the businesses. “This isn’t just a billionaire wealth tax,” Garry Tan, the head of the tech-investing firm Y Combinator, posted on X last December. “It’s a destroy tech in California proposition.”
It may be another sign of the resentment Regan has stirred up that, early this fall, journalists covering the Proposition 40 campaign, including me, received two investigative reports that the S.E.I.U. had commissioned about Regan’s behavior when he was pushing hard to get Proposition 40 on the ballot. One found that he had told an S.E.I.U. official, with whom he has clashed for years, to “fuck off” after she made a remark to him at a fund-raising event. (A spokesperson for the initiative campaign said,“Mr. Regan used profanity and does not pretend otherwise.”)
Regan told me that, just before Christmas last year, he was invited to Governor Newsom’s office. In Regan’s version of the meeting, Newsom said, “I’m getting all these calls from billionaires.” Regan said that he asked Newsom, “Do we see the problem the same way?” Newsom complains about economic inequality, and often deploys a quote long attributed to Plutarch: “The imbalance between the rich and the poor is the oldest and most fatal ailment of all republics.” But he has consistently opposed wealth taxes in California, saying that they would drive away major providers of the state government’s resources. Newsom told Regan that his proposal was unrealistic.
Once Regan had gathered enough signatures to get Proposition 40 on the ballot, he had until late June to withdraw it if he were offered a compromise that he found acceptable. Shortly before the deadline, he got a call from the Governor’s chief of staff, Nathan Barankin, who said that Newsom was prepared to work with him on a tax proposal. Regan told me, “Really, it was ‘If you play ball, we’re gonna promote you.’ This is the leader of the Democratic Party, the front-runner for President of the United States!” Regan had several phone calls with Newsom aides, who proposed compromises that Regan rejected. A week before the June deadline, Regan took out full-page ads in two California newspapers, offering to cut the proposed tax rate from five per cent to two per cent if Newsom would endorse it. Newsom rebuffed the offer. Regan said, “That’s where it ended.” A wealth tax was finally up for a vote.
In late September, polls showed that a slight majority of decided voters were in favor of Proposition 40. But the initiative has far less support than you’d expect from Democratic elected officials. Though the California Democratic Party has endorsed it, only three members of the California congressional delegation and ten members of the state legislature have done the same. California’s two U.S. senators have declined to support it; Xavier Becerra, Newsom’s likely successor, is opposed. Katie Porter, a former member of Congress who ran unsuccessfully for governor this year, is another opponent of the initiative. “It pours money into the for-profit health-care industry, which is already ripping people off,” she told me. “We have people with two hundred million, three hundred million, eight hundred million in assets, and it says to them, ‘You don’t need to give anything.’ ” Porter said, of Democrats thinking about running for President in 2028, “They see this coming. I expect to see very thoughtful ideas coming from them.”
The most notable exception to Democratic officials’ wariness about Proposition 40 is Ro Khanna, a congressman who represents part of Silicon Valley. Last year, during the week between Christmas and New Year’s, Khanna, while on vacation in Florida, read a story in the New York Times about how billionaires like Larry Page and Peter Thiel were threatening to leave the state if Proposition 40 passed. (Thiel, who declared support for Trump much earlier than other Silicon Valley billionaires, contributed to Khanna’s congressional campaign in 2016.) Khanna posted on X, “Peter Thiel is leaving California if we pass a 1% tax on billionaires for 5 years to pay for healthcare for the working class facing steep Medicaid cuts. I echo what FDR said with sarcasm of economic royalists when they threatened to leave, ‘I will miss them very much.’ ” The post brought an immediate, hot-blooded riposte from Garry Tan. Earlier this year, Khanna received a barrage of attacks from Mark Cuban, the Dallas-based investor who for years appeared on the show “Shark Tank.” “If this passes, only idiot startup founders stay in Cali,” Cuban wrote.
Before Khanna’s post on X, he had never met Dave Regan, but afterward they formed an alliance, and Khanna, who is considering running for President in 2028, began campaigning aggressively for Proposition 40. In response, Ethan Agarwal, a long-shot Democratic candidate for governor, decided to switch races and run for Congress against Khanna, with the support of billionaires such as Tan and Ron Conway. Khanna won easily.
I met with Khanna, a slim, intense man who speaks rapidly, in perfect sentences, at a coffee shop in Fremont, just across the San Francisco Bay from the heart of Silicon Valley. Khanna, the son of immigrants from India, grew up outside Philadelphia, went to the University of Chicago and Yale Law School, and moved to California in 2003 to work for the Valley’s leading law firm, Wilson Sonsini. It was a different place then, he said: “It was still very much a culture of startups—not the winners of society but the insurgents, people who were off the beaten path, immigrants with accents, starting companies.”
Now, Khanna said, “there are five trillion-dollar companies in my district. When I got elected to Congress, there wasn’t a single trillion-dollar company. They’re seen as oligarchs, as the people with wealth and power, controlling our lives—not as outsider insurgents. So it’s a very, very different sense of their place in society. And there’s also a lot more arrogance. There’s this sense that they are carrying American civilization on their backs and that they are the chosen allocators of capital and the ones who are making us lead against China, and that if it weren’t for them America would not be a superpower.” Khanna’s district is one of the richest in the country; in Fremont, which isn’t the wealthiest town in the area, the median annual household income is more than a hundred and eighty thousand dollars. Still, he said, his constituents feel intense economic pressure: “There’s a concern that their kids aren’t going to be able to live here. The cost of housing has exploded. The cost of child care has exploded. Some of them have done well, because a lot of them work at tech companies. But other people are leaving.”
During Khanna’s time in Congress, he has moved from a close alignment with tech executives to the left. In 2020 he co-chaired Bernie Sanders’s Presidential campaign. After Khanna’s X post, Sanders called him to say that he would endorse Proposition 40. More recently, Sanders and Khanna have co-sponsored a bill that would impose a national wealth tax of five per cent on billionaires, which Khanna says would raise four hundred billion dollars a year. I asked Khanna why he thinks so few Democratic politicians have endorsed Proposition 40. “People don’t fully see that this is a defining fight for the soul of the Democratic Party,” he said. “Are we going to go back to our New Deal roots of calling out economic royalists, or are we going to continue to be a party cozying up to moneyed interests? This is the first initiative to actually tax billionaire wealth that’s going to get a vote, not only in our nation but the world. It has the equivalent weight to Proposition 13, which Reagan rode into the White House.”
Khanna continued, “Why are more elected officials in California not worried about missing this? I think, fundamentally, they don’t want to upset donors. Ron Conway and Reid Hoffman and Eric Schmidt contributed millions of dollars to help Biden defeat Trump, and to help us win back the House and Senate. It’s not just cravenness. There’s a view that the biggest threat to American democracy is Donald Trump and not winning the House or Senate, and that we would be foolish to kneecap the prominent billionaires who are on our side. Why are we taking them on when we need their funding to compete with Elon Musk and the other billionaires on the Republican side?”
To Khanna, this is a major misreading of the mood in the Democratic Party, and he thinks that potential Presidential candidates should take note. “I believe that taxing billionaires will be one of the three key pillars to a Democratic campaign,” he said. “In my view, it’s Medicare for All, taxing billionaires, and not having foreign wars. Taxing billionaires is a key component. Joe Biden initially was going to be running on this in ’24.” For Democrats in 2028, he said, the question will be “Where do you stand?”
The online prediction markets are giving Proposition 40 only about a thirty-per-cent chance of passing. If polls show that it has a slight advantage, how can that be? The markets price in a number of other factors—most obviously the opposition’s advertising campaign, which will go largely unanswered because the proponents of Proposition 40 used up most of their cash to gather signatures to get it on the ballot. The first round of opposition ads leaned heavily on a study published by economists at the Hoover Institution, a Stanford-based conservative think tank; they envision an “Atlas Shrugged” scenario in which Proposition 40 drives so many billionaires out of California that, rather than raising a hundred billion dollars for the state, it leads to twenty-five billion in lost tax revenue. During the final weeks of the campaign, the initiative’s proponents will have to rely on person-to-person organizing. Regan, who’s never hesitant to think big, told me he is confident that this can work: “If you can find a million people to turn out ten people each, that’s ten million votes. Seven million votes wins. That’s what we’re trying to do. It’s never been done at this level, in the history of American politics.” He said it’s not out of the question that he gets the Pope’s endorsement.
Proposition 41 and Proposition 42, the two initiatives meant to nullify Proposition 40, will have tens of millions of dollars devoted to their campaigns. Proposition 41 presents itself as a measure to improve how the state audits spending, and Proposition 42 as a way of protecting people’s retirement savings from unexpected taxation. “Proposition 41 and Proposition 42 are hilariously cynical,” Brian Galle, one of the Proposition 40 authors, told me. “They are an anti-billionaire-tax burrito. There’s a wrapper that looks harmless”—and, inside, poison-pill provisions that would negate Proposition 40. In California, when conflicting initiatives pass, only the one with the most votes takes effect. So it’s possible that Proposition 40 could pass but still fail, if either Proposition 41 or Proposition 42 gets more votes.
Another major hurdle facing Proposition 40 is the substantial array of labor groups that do not support the measure. The California A.F.L.-C.I.O. has endorsed the initiative, but the state council of the S.E.I.U., the national S.E.I.U., and the national A.F.L.-C.I.O. have maintained what John Updike, in a different context, called a “meaningful silence.” The California Teachers Association, which represents more than three hundred thousand educators, is openly opposed to the initiative. Proposition 13, which ushered in the modern era of California ballot initiatives, devastated public schools in the state by placing strict limits on their main source of income: property taxes. The latest in a long series of corrective measures was a thirteen-per-cent state income tax on millionaires, which went into effect in 2012 and is due to expire in 2030. This year, the C.T.A. has put significant resources into an initiative of its own, Proposition 3, which would make the millionaire tax rate permanent. This is especially important because California, unlike the federal government, taxes capital gains at the same rate as ordinary income, so each wave of initial public offerings by tech companies generates large revenues for the state.
The C.T.A. sees Proposition 40 as a direct competitor to its own initiative, because only a small portion of the money from the billionaire tax would go to public schools. And the vast campaign to stop Proposition 40 could put voters in an anti-tax frame of mind, also bringing down Proposition 3. Not long after Regan proposed Proposition 40, he attended a Zoom meeting of union leaders, who included two representatives from the C.T.A., to try to persuade them to support it. The meeting didn’t go well. “They were on our side in 2020 and 2021,” Galle told me, referring to the unsuccessful efforts to pass a wealth tax in the state legislature, “and now they’re yelling at us on Zoom calls.” Regan wound up losing his temper and left the meeting. Any hope of creating a broad labor coalition backing Proposition 40 ended. Build a Better California, the anti-Proposition 40 group, has endorsed Proposition 3.
Even if Proposition 40 passes and Propositions 41 and 42 don’t, California’s billionaires will surely invest just as heavily in pursuing legal challenges as they have in opposing the initiative campaign. The authors of Proposition 40 gave it an effective date of January 1, 2026, to prevent billionaires from evading the tax by leaving California after its passage. That provision could be challenged in court based on past decisions against retrospective taxation. Then, there’s the question of how to value billionaires’ assets, a task that would fall to a state agency called the Franchise Tax Board, which doesn’t have an established way of doing so and would presumably be hearing constantly from the billionaires’ lawyers. Real-estate holdings are exempted from the tax so that Proposition 40 can’t be accused of violating Proposition 13’s property-tax limits. But billionaires have a lot of other assets, held in many ways—outright ownership, partnerships, special companies officially headquartered elsewhere. One of the proposition’s authors cited a famous line in “Hotel California” to argue that it will be very difficult even for billionaires who have already moved away to avoid the tax, because they can be shown to have an “intent to return” if their companies are still in the state. Of course, that argument would be challenged, too.
The advantage of state wealth taxes is that they don’t face the barrier of the Constitution’s restriction on direct federal taxation, which was amended for income but not for wealth. The advantage of a new federal wealth tax is that billionaires could not move from state to state to avoid it. (Newsom says that he favors a national tax on billionaires for this reason.) Several European nations—France and Norway, for example—have imposed wealth taxes, only to see some of the intended targets move their legal residences to other countries. The United States puts much higher barriers in the way of people who want to move out of the country to avoid taxes: they have to renounce their citizenship, and, if they’re rich, they have to pay an immediate, severe exit tax. The authors of Proposition 40 are in favor of trying to impose wealth taxes at any level of government, but others argue that a national wealth tax has the best chance of success here.
Still, a federal wealth tax would immediately be challenged in the courts. In a 2024 case called Moore v. United States, which tax lawyers watched with rapt attention and the public didn’t much notice, several Supreme Court Justices indicated that they would likely consider a federal wealth tax unconstitutional. A differently composed Supreme Court, or another constitutional amendment, may have to arrive before a national wealth tax would be possible. Or a national wealth tax could attempt to avoid such obvious legal difficulties. One proposal is to apply a capital-gains tax on inheritances. The wealth tax that Biden put forward would have framed increases in the value of assets as income so that, legally, it could be considered an income tax. There are also a number of loopholes that could be closed. Even these changes, though, would face years of fierce opposition from people with the resources to fight them while the public’s attention inevitably flagged.
These are legal questions. For now, political questions are far more important. Imagine the soon-to-arrive moment when Anthropic goes public, creating, overnight, multibillion-dollar fortunes just as the public is turning against A.I. (OpenAI, evidently aware of this dynamic, has announced that it will not go public this year.) Imagine a Democratic Presidential primary in which Newsom feels compelled to propose a national wealth tax because he promised to do so instead of endorsing Proposition 40. Dan Newman, a veteran Democratic political consultant in California who is working for the opposition to Proposition 40, told me, “It’s going to be a raise-your-hand moment at the early Democratic-primary debates”—no candidate in the field will be able to duck the question entirely. They will have to weigh the power of voters’ anti-billionaire mood against the value of the Democrats’ relationship with Big Tech. Endorsing wealth taxes could also imperil the Party’s relationship with the Brahmin left, which is reliably liberal on social issues but not necessarily on economic ones, and which might not believe that non-billionaires will be spared significant new taxation.
In the first Gilded Age, the fight over taxation and the concentration of wealth went far beyond a technical focus on policy—it was more like a holy war that was fought on theological grounds and then ended up in the mundane world of elections, laws, and court decisions. The fight over Proposition 40 feels that way too. So, probably, will the fight over a national wealth tax. One of the few anti-wealth-tax billionaires who was willing to answer my questions was Mark Cuban—who isn’t a Californian. Via e-mail, he offered the same prediction about wealth taxation that Garry Tan issued: it would deliver a death blow to economic innovation by forcing cash-poor, asset-rich entrepreneurs to set aside money that they don’t have. But he wound up levelling a more general critique: “Our politicians have stopped trying to solve problems. They aren’t trying to improve the lives of people in this country who can’t afford to live. That are terrified of getting sick. That can’t afford to have kids. Who don’t see a future for themselves. Not one fucking solution is offered from either side. They just stick to their ideology and do their best to demonize someone.” Michael Moritz, who is more restrained, said, “A single-state, poorly constructed wealth tax is not a solution to what ails us.”
Of course, wealth taxes would produce revenues that could be directed to useful purposes, such as expanding government programs or reducing the disastrously high federal deficit. The income tax had such effects. Emotionally, though, Proposition 40 has sharpened people’s views of billionaires—as heroic innovators and job creators, or as oligarchical resource hogs. People who support Proposition 40 and other wealth taxes usually think that billionaires per se are a problem. A group called Patriotic Millionaires, which advocates for higher taxes on the wealthy, has endorsed Proposition 40, making it the only organization officially made up of rich people to do so. One of its leading members, Alan Davis, who runs a foundation started by his parents, doesn’t disagree with Cuban’s opinion that Proposition 40 is an attack on the very rich for being very rich. “Most people say this is a way to raise revenue,” he told me. “I think that’s a dividend you get from reducing the wealth and power of the ultra-rich. The most important reason to tax the ultra-rich is to make them less rich.”
Tom Steyer, Proposition 40’s only known billionaire supporter and a former candidate for governor, told me that last fall he tried to find a compromise with the measure’s opponents: “I suggested to several super-rich Californians, ‘Look, if you don’t like this, why don’t we sit down and come up with something that works from your standpoint and actually addresses the issues?’ And they had no interest in doing it.” Steyer, who made his fortune by starting a hedge fund in San Francisco, explained the difference between himself and the other billionaires by saying that he is more aware of the connection between rich people and society as a whole. “The idea that extraordinarily rich people can succeed without the support of society, and that they can preserve their wealth in the face of suffering and inequality—I don’t believe it can happen, and I know it shouldn’t happen,” he said. He lamented the passing of what he saw as tech’s originating spirit, entrepreneurial but also patriotic, which was exemplified by the Hewlett-Packard founders’ heavy involvement in philanthropy and public service. “Can you imagine David Packard or Bill Hewlett doing the kind of self-promotion that Elon Musk does?” he said. “There’s obviously been just a really dramatic change. I don’t want to turn them into gods, but Dave Packard and Bill Hewlett felt a deep connection with the country and with the state and with the land. It doesn’t exist today.”
I asked him how he explains this change. “The people who are making the big money in California are technology people,” he said, and many of them “are incredibly focussed on that and quite dismissive of the other kinds of learning. That is not something they respect. English literature is not something they respect.” It may be pertinent that we were speaking at the decidedly old-school Yale Club, in New York City—Steyer is an alum. “When you get too reductive in terms of focussing just on money, or just focussing on technology, there are a lot of things that you’re cutting away from that world view,” he went on. “And a lot of those things are what we would think of as human values, like compassion, some sense of honor, all the things that you read about in the soft courses. And, if you don’t have that, then O.K., good night. You have a different frame of reference and a different value system.”
Whose vision of billionaires will prevail? If it’s Steyer’s, and evidently much of the public’s, then we may be in for a change in the workings of the country as major as the advent of the income tax. For a national wealth tax, Emmanuel Saez told me, “five per cent a year is what I would call a small, reasonable package. Things are moving very fast right now. Proposition 40 is the best shot we’ve ever had, and that’s why I’m not surprised at the interest in it. If it passes, it will be a revolution.” ♦