California Democrats Endorse 5% Billionaire Tax, Defying Newsom

California's Democratic Party backed a one-time 5% tax on the state's billionaires, deepening a rift with Gov. Gavin Newsom three months before voters decide.

California's Democratic Party endorsed a one-time 5% tax on the state's roughly 200 billionaires Sunday, clearing the 60% threshold needed to back a measure that would raise $100 billion for healthcare.

"This endorsement puts to rest the idea that California Democrats are not united by the billionaire tax — they are," said Dave Regan, president of SEIU United Healthcare Workers West, the union that proposed the initiative.

The party's roughly 380-member executive board voted 145 to 90 in San Diego after a first ballot fell short at 59.2%, according to Jane Natoli, a member of the party's resolutions committee. Public Policy Institute of California polling from May showed 54% of likely voters and 76% of Democrats support the measure.

The endorsement hands Proposition 40 momentum ahead of the Nov. 3 vote, but opposition from Newsom, gubernatorial candidate Xavier Becerra, and major unions means the party is backing a measure its own leaders reject — a split that could shape the governor's race and California's fiscal agenda.

A Party at Odds With Its Leaders

The endorsement caps weeks of infighting that split organized labor and put the party at odds with its own governor. Newsom has argued the levy could push the state's largest taxpayers to flee, while Becerra, the Democratic nominee for governor, favors Proposition 3, which would permanently extend an income tax surcharge on high earners to fund education.

The No on Prop. 40 campaign, backed by the California Medical Association and California Primary Care Association Advocates, spent about $7,000 on hotel rooms, registration fees and travel for several voting board members and their proxies, according to a person familiar with the matter. The payments were made via Hilltop Public Solutions, a political consulting firm hired by opponents.

Opponents also include the California Teachers Assn., California Professional Firefighters, and Planned Parenthood Affiliates of California. Building a Better California, a business-backed PAC, has raised more than $118 million, largely from billionaire donors including Google co-founder Sergey Brin.

What the Tax Would Fund

Proposition 40 seeks to raise $100 billion over five years to backfill cuts to Medicaid and food assistance programs included in the One Big Beautiful Bill Act signed by President Trump last year. Supporters say the federal tax cuts benefit the wealthy at the expense of low-income people.

The measure's backers tie the tax directly to the toll of federal healthcare cuts, which they say have already eliminated coverage for millions of Californians. Upward of 400 hospitals in California have laid off at least 3,400 healthcare workers, according to the campaign, with a second wave of layoffs that could reach 145,000 lost jobs across hospitals, clinics and home care providers. Without new revenue, the campaign estimates as many as 83 hospitals and clinics could close.

The tax would apply to people who resided in California as of Jan. 1 of this year and who have a net worth of $1 billion or more at the end of this year, excluding certain assets such as directly owned real estate.

Divisions Within Labor

The measure has split unions that usually align. The SEIU California executive board voted to remain neutral, while the State Building and Construction Trades Council of California opposed it. The California Federation of Labor Unions, representing roughly 1,300 affiliated unions, is set to vote Tuesday.

Regan cited an internal poll showing more than 80% of registered Democrats support the tax, along with 70% of union members and 63% of teachers. The party's endorsement carries practical weight: voter materials published by the party before the November election will mention it.

The party also voted to oppose two competing ballot measures seeking to undercut the billionaire tax, along with a voter ID measure and a proposal to weaken the California Environmental Quality Act for housing and infrastructure projects. Democrats endorsed two housing bonds — an $11.25-billion affordable housing bond and a $25-billion down payment assistance program — and an $8.4-billion immunology research bond.

California voters rejected a 2020 split-roll measure to raise commercial property taxes, a sign that wealth-focused levies face an uphill path even in a Democratic stronghold. If Proposition 40 passes in November, the one-time nature of the tax means the state would need recurring revenue to sustain the healthcare funding it promises — a question opponents say the measure leaves unanswered.

This article is for informational purposes only and does not constitute investment advice.