SACRAMENTO\u00a0\u2014\u00a0For all the media attention California\u2019s proposed billionaire tax has generated nationally \u2014 with some blasting it as a foolish Left Coast assault on American enterprise \u2014 the November ballot item has actually triggered a rift among progressive labor unions and Democrats, groups critical to the measure\u2019s success. <\/p>\n
Championed by California\u2019s largest health workers union, Proposition 40 would levy a one-time, 5% tax on California\u2019s roughly 200 billionaires. The measure aims to backfill Medicaid cuts signed into law last year by President Donald Trump, and would raise an estimated $100 billion. <\/p>\n
Dave Regan, the measure\u2019s architect and president of Service Employees International Union-United Healthcare Workers West, said the tax was intended to prevent \u201cthe imminent collapse of California\u2019s health care system because of the Trump cuts in the \u2018One Big Beautiful Bill.\u2019\u201d<\/p>\n
Regan, who has become well-known for using ballot measures as leverage in negotiations with state lawmakers and the healthcare industry, seemed poised to channel public anxiety over economic affordability, access to medical care and anti-Trump sentiment when the initiative was announced last fall.<\/p>\n
Today however, the initiative not only faces heavy and well-funded opposition from those it aims to tax, but also divided support among groups who traditionally favor taxes on the wealthy \u2014 labor unions. Both the powerful California Teachers Association and the State Building and Construction Trades Council of California have come out against Prop. 40, while Teamsters California and AFSCME California support it. Others unions have yet to weigh in, including the California Federation of Labor Unions and SEIU California, a parent organization for Regan\u2019s healthcare worker union.<\/p>\n
Establishment Democrats are also divided. Gov. Gavin Newsom aggressively opposed the measure and sought to negotiate with Regan to remove it from the ballot beginning last year. Days before a state deadline to withdraw ballot measures in late June, Regan publicly offered to trim the wealth tax to 2% over two years, an offer Newsom quickly rejected.<\/p>\n
To some close observers, the offer signaled that Regan may have been looking for a way out of an expensive ballot fight.<\/p>\n
\u201cI found it unusual that he did that because he\u2019s usually not that kind of negotiating type \u2014 he\u2019s no nonsense,\u201d said Democratic political consultant Steven Maviglio. \u201cI don\u2019t know if he felt it was a hot potato or what.\u201d<\/p>\n
Regan\u2019s union spent $31 million to gather 1.6 million voter signatures to put the tax on the ballot. <\/p>\n
\u201cAt the outset, this may have looked like the replay of a strategy he\u2019s employed successfully many times in the past, but he ended up painting himself into a corner, and so now he\u2019s stuck with an initiative that he knows he probably can\u2019t pass,\u201d said Dan Schnur, a politics and communications professor at Pepperdine, USC and UC Berkeley.<\/p>\n
A March poll by UC Berkeley\u2019s Institute of Governmental Studies showed 52% of registered voters support the billionaire tax while 33% opposed it and 15% were undecided. However, campaign experts say its position remains precarious, due in part to the deep pockets of its opponents.<\/p>\n
Several billionaires, including Google co-founder Sergey Brin, have so far pumped a combined $118 million into a campaign committee that gathered enough signatures to place two other measures on the ballot aimed at undercutting the billionaire tax.<\/p>\n
Groups that might otherwise support more revenue for healthcare have also come out against Prop. 40, including Planned Parenthood Affiliates of California and the California Medical Assn.<\/p>\n
\u201cThe dangerous wealth tax directly threatens vital funding for education and schools, healthcare and clinics, public safety, and infrastructure projects by making California\u2019s revenue even more volatile,\u201d leaders of the California Medical Association, California Primary Care Association and California School Boards Association wrote in a joint statement. <\/p>\n
Regan and fellow supporters insist that, without approval of the tax measure, Trump\u2019s \u201cBig Beautiful Bill\u201d will gut the state\u2019s healthcare resources. <\/p>\n
\u201cThis will take between $20 and $25 billion annually out of our healthcare system, meaning three and a half million people are going to lose insurance, 150,000 health care workers will be laid off and over 20 million consumers are already paying more in premiums, deductibles and copays,\u201d he said.<\/p>\n
While prominent progressives such as Sen. Bernie Sanders (I-Vt.) and Rep. Ro Khanna (D-Fremont) have voiced support for the measure, some progressive opponents say its near exclusive focus on healthcare is a problem. (Only a small portion of tax revenues would go toward education and food security.) <\/p>\n
The CTA said after reviewing the measure, its council of delegates \u201cdetermined that this policy will not provide the sustainable and long-lasting funding that our schools and communities deserve.\u201d Leaders of the state\u2019s largest teachers union plan to focus their efforts on passing Proposition 3, which would make permanent an existing tax on certain high earners to fund schools and community colleges.<\/p>\n
Labor unions have typically aligned in support of tax-raising ballot measures, including earlier temporary versions of this year\u2019s Prop. 3 and an unsuccessful 2020 proposal to revamp commercial property taxes.<\/p>\n
But the billionaire tax \u201cdoesn\u2019t benefit everybody. It benefits workers in the healthcare sector primarily, and I think that\u2019s why not everybody\u2019s on board. It\u2019s not a \u2018rising tide lifts all boats\u2019 kind of proposal,\u201d Maviglio said.<\/p>\n
In the 15 years he has led SEIU-UHW, Regan has become known for using expensive ballot measures \u2014 or the threat of them \u2014 to bring lawmakers and industry opponents to the negotiating table.<\/p>\n
In a landmark 2023 deal, Regan secured a statewide $25 wage floor for healthcare workers after qualifying initiatives to raise industry wages in Los Angeles and other cities. The deal included a 10-year moratorium on minimum wage propositions. He also pushed ballot measure regulations on kidney dialysis clinics for three subsequent election cycles. Though none of them passed, the dialysis industry spent hundreds of millions between 2018 and 2022 to defeat them.<\/p>\n
\u201cEverybody knows that he is wielding ballot measures as a weapon to leverage his unionization or political demands. It\u2019s not a secret. He\u2019s admitted it,\u201d said Brandon Castillo, a ballot measure strategist who often finds himself opposite Regan in ballot fights including the dialysis clinic propositions.<\/p>\n
The measure retroactively applies a tax on billionaires who were residing in California as of Jan. 1. Newsom and other opponents say the initiative would drive the ultra-wealthy out of the state and their departure would blow a hole in the state budget.<\/p>\n
California\u2019s budget is dependent on income taxes the rich pay on stock market profits. The Legislative Analyst\u2019s Office said the measure would \u201clikely\u201d result in an \u201congoing decrease in state income tax revenues of hundreds of millions of dollars or more per year<\/a>.\u201d<\/p>\n