California is grappling with proposals to increase taxes on its wealthiest residents as the state faces an ongoing affordability crisis. Two distinct efforts are underway: a statewide “billionaire tax” and a Los Angeles city proposal targeting companies with highly compensated CEOs.
Statewide Billionaire Tax
A proposal for a statewide tax on billionaires—those with assets exceeding $1 billion—is currently seeking nearly 875,000 signatures to qualify for the November ballot. The tax, applicable to residents as of January 1, would be a one-time levy of up to 5% on assets, with the option to pay over five years. The Service Employees International Union-United Healthcare Workers West (SEIU-UHW) is the main backer of the measure, anticipating it will raise $100 billion, primarily for healthcare, food assistance, and education.
However, the proposal faces opposition. Governor Gavin Newsom has voiced concerns that the tax could incentivize wealthy individuals to relocate, impacting the state’s revenue. The California Legislative Analyst’s Office estimates the state could lose “hundreds of millions of dollars or more per year” if billionaires choose to leave. Some billionaires, including DoorDash co-founder Andy Fang and PayPal/Palantir co-founder Peter Thiel, have already signaled intentions to move business interests or residency out of state.
Los Angeles “Overpaid CEO Tax”
In Los Angeles, union activists are pushing for a tax on companies whose CEOs earn at least 50 times more than their median-paid employee. This measure, supported by the Fair Games Coalition, would apply to companies with 1,000 or more employees and would allocate revenue to housing, infrastructure, and social programs. Supporters rallied outside the Tesla Diner, owned by Elon Musk, to highlight what they see as economic disparity.
A similar effort to tax companies with disproportionately paid CEOs is also underway in San Francisco, where a levy on such businesses was approved in 2020.
What’s Next?
Supporters of the statewide billionaire tax must gather the required signatures by June 24 to secure a place on the November ballot. If successful, California voters will decide whether to implement the tax. It is possible that the debate will intensify as the election nears, with both proponents and opponents actively campaigning to sway public opinion. Should either measure pass, legal challenges are also a possibility. The outcome could significantly impact state and local revenue streams, as well as the future economic landscape of California.
Frequently Asked Questions
What is the proposed statewide billionaire tax?
The proposal would impose a one-time tax of up to 5% on taxpayers and trusts with assets valued at more than $1 billion, applying to residents as of January 1.
How much money is the SEIU-UHW hoping to raise with the billionaire tax?
The Service Employees International Union-United Healthcare Workers West estimates the tax will raise $100 billion, with the majority allocated to healthcare programs.
What is the status of the “Overpaid CEO Tax” in Los Angeles?
Supporters of the Los Angeles measure must collect 140,000 signatures in the next 120 days to get it on the November ballot.
As California continues to grapple with economic challenges, will these proposals to tax the wealthy ultimately address affordability concerns or drive away valuable economic resources?
