{"id":340828,"date":"2026-06-01T01:31:15","date_gmt":"2026-06-01T01:31:15","guid":{"rendered":"https:\/\/www.newsbeep.com\/us-ca\/340828\/"},"modified":"2026-06-01T01:31:15","modified_gmt":"2026-06-01T01:31:15","slug":"sacramento-created-californias-budget-problem-billionaire-tax-wont-fix-it","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/us-ca\/340828\/","title":{"rendered":"Sacramento created California\u2019s budget problem \u2014 billionaire tax won\u2019t fix it"},"content":{"rendered":"

Proponents of California\u2019s proposed Billionaire Tax Act have a story to tell: President Donald Trump and the Washington Republicans cut health care, and so the \u201cbillionaire tax\u201d is the\u00a0necessary\u00a0response.<\/p>\n

Then there\u2019s the reality, which we describe in\u00a0a new paper<\/a>\u00a0from the\u00a0Hoover\u00a0Institution.<\/p>\n

Our analysis looks at what Trump\u2019s \u201cOne Big, Beautiful Bill\u201d\u00a0actually\u00a0does to Medi-Cal, and whether the proposed first-in-the-nation wealth tax would address it.<\/p>\n

Spoiler alert: The answer to the second question is no, and the reasons start with Sacramento, not Washington.<\/p>\n

\"Bernie<\/p>\n

Bernie Sanders speaks at the Billionaire Tax Now rally on Wednesday, Feb. 18, 2026 in Los Angeles. Los Angeles Times via Getty Images<\/p>\n

Start with the fact that the state of California does not have a revenue problem; it has a spending problem.<\/p>\n

State tax revenue is up 55 percent since 2019, but spending is up more \u2014 68 percent over that same period.<\/p>\n

Newsom\u2019s own January 2026 budget forecast projected a $93 billion shortfall over the next four years. This is a hole that was dug entirely by Sacramento Democrats, not Washington Republicans.<\/p>\n

The driver of this crisis is Medi-Cal, California\u2019s Medicaid program.<\/p>\n

\"Attendees<\/p>\n

Attendees cheer as US guitarist Tom Morello performs during the Billionaire Tax Now rally at the Wiltern Theater in Los Angeles. CHRIS TORRES\/EPA\/Shutterstock<\/p>\n

Since 2011, total program expenditures have nearly tripled, to about $185 billion a year, and Medi-Cal\u2019s claim on the general fund has grown from 14 to 20 percent.<\/p>\n

Have Medi-Cal services or quality increased nearly threefold since 2011? They have not. By virtually every measurement, Medi-Cal\u2019s quality rating remains below the national median for both adults and children.<\/p>\n

This is not a program in need of a bailout. It\u2019s one that needs systemic reform.<\/p>\n

Yes, the funding reductions in the One Big Beautiful Bill will reduce federal Medi-Cal spending by $156 billion over 10 years.<\/p>\n

But more than half of that \u2014 $89 billion \u2014 comes from work (or volunteer) requirements for able-bodied adults who don\u2019t qualify for the law\u2019s broad exemptions.<\/p>\n

Paying the bills for able-bodied adults who choose not to work, train, or volunteer 80 hours per month is a policy choice that Sacramento can make.<\/p>\n

But voters should understand it for what it is: an optional state spending expansion, not a hole created by Washington.<\/p>\n

\"Gov.<\/p>\n

Gov. Gavin Newsom speaks to reporters inside the US Capitol in Washington, DC on May 20, 2026. Anadolu via Getty Images<\/p>\n

What about the wealth tax? It fails on its own terms.<\/p>\n

We\u00a0project<\/a>\u00a0\u201cone-time\u201d revenue \u2014 scare quotes very much intended \u2014 of $40 billion. Using Sacramento-style math, that $40 billion is supposed to cover a $156 billion, 10-year federal reduction.<\/p>\n

Put another way: The \u201cone-time\u201d billionaire tax is aimed at making sure work requirements for Medi-Cal never apply in California. That\u2019s pretty much it.<\/p>\n

Meanwhile, as billionaires leave, the state\u2019s income tax base will erode by roughly $2.9 billion per year.<\/p>\n

When those recurring losses are combined with the federal reductions, the $40 billion will be exhausted by 2029.<\/p>\n

\"President<\/p>\n

President Donald Trump speaks next to Defense Secretary Pete Hegseth during a cabinet meeting in the Cabinet Room at the White House. REUTERS<\/p>\n

At that point, every fiscal incentive points toward extending the tax or passing a new one.<\/p>\n

Suddenly, that \u201cone-time\u201d levy will look very much like a foot in the door to\u00a0permanent\u00a0wealth taxation.<\/p>\n

There is an alternative to all of this: Simply accepting the One Big Beautiful Bill\u2019s work requirements. That would actually save the state approximately $15 billion over 10 years.<\/p>\n

From there, the actual math isn\u2019t complicated.<\/p>\n

Ending \u201cfree\u201d Medi-Cal for illegal immigrants would save $4.1 billion annually.<\/p>\n

Returning Medi-Cal\u2019s share of the General Fund to its pre-COVID average of 15.7 percent would save $9.8 billion per year.<\/p>\n

Together, that would generate over $125 billion in savings, nearly double the remaining $67 billion California has to cover after work requirements are included.<\/p>\n

The Billionaire Tax Act is not a solution. It\u2019s a deflection. The state has all the fiscal tools it needs to solve its budget problem. What it lacks is political will to use them.<\/p>\n

Joshua Rauh is the George P. Shultz Senior Fellow in Economics at the\u00a0Hoover\u00a0Institution, Benjamin Jaros is a research fellow and John Doran is a research associate at Stanford University\u2019s\u00a0Hoover\u00a0Institution.<\/p>\n","protected":false},"excerpt":{"rendered":"Proponents of California\u2019s proposed Billionaire Tax Act have a story to tell: President Donald Trump and the Washington…\n","protected":false},"author":2,"featured_media":340829,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6],"tags":[1184,7,9,8,13873,47,1755,2803,121,10944,140396,140397,19870],"class_list":["post-340828","post","type-post","status-publish","format-standard","has-post-thumbnail","category-california","tag-ca","tag-california","tag-california-headlines","tag-california-news","tag-income-tax","tag-los-angeles","tag-medi-cal","tag-president-donald-trump","tag-sacramento","tag-sen-bernie-sanders","tag-state-tax-revenue","tag-washington-republicans","tag-wealth-tax"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/posts\/340828","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/comments?post=340828"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/posts\/340828\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/media\/340829"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/media?parent=340828"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/categories?post=340828"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/tags?post=340828"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}