California voters will decide whether the state will charge a one-time tax on billionaires. The idea that has split Democrats and labor unions.

Transcript

SCOTT SIMON, HOST:

A proposal on the ballot in California would charge that state's billionaires a one-time tax worth tens of billions of dollars in revenue. Senator Bernie Sanders is scheduled to be in California this weekend at rallies for the proposal. But other Democrats, including California's governor, Gavin Newsom, are campaigning against it. We're joined now by Marisa Lagos from KQED in San Francisco. Marisa, thanks so much for being with us.

MARISA LAGOS, BYLINE: Thanks for having me.

SIMON: What are voters being asked?

LAGOS: Yeah. This is known as Proposition 40. It was proposed by a labor union that represents healthcare workers. They're asking voters to impose a one-time 5% tax on billionaires' overall assets, so a wealth tax, not just on their annual income or capital gains but things like stocks, bonds, businesses. It's estimated that more than 200 billionaires live in the state. So, you know, a tech executive worth 100 billion might have to pay around $5 billion under this. And the money would be used to backfill the steep federal budget cuts that were made under President Trump's so-called Big Beautiful Bill. Those cuts will push more than three million Californians off Medicaid.

SIMON: Why do proponents say people should vote for it?

LAGOS: Yeah. They say Republicans made those healthcare reductions in order to pay for deep tax cuts for the wealthiest Americans. So the union pushing this argues the tax is fair. I talked to Dave Regan. He's president of that union that wrote Prop 40. He says the wealth of California billionaires is about $2.3 trillion.

DAVE REGAN: It has more than tripled in the last seven years, and 70% of that $2.3 trillion is in publicly traded stocks. And when the value of that grows, it's all beyond the reach of the tax system.

LAGOS: And so this is also garnering support from other labor groups, the state Democratic Party and some high-profile progressives like Senator Bernie Sanders, who's campaigning this week in California alongside Congressman Ro Khanna.

SIMON: But Democratic Governor Gavin Newsom is opposed. Why?

LAGOS: Yeah. And it's not just Newsom. You have groups like Planned Parenthood, the California Teachers Association lining up against it, and of course, most of the billionaires who have spoken out themselves, not surprisingly. I mean, they basically say that this is going to drive rich people out of the state, that it's going to result in less business in California, lower state revenues, and that all of that will hurt schools and police and other programs. That's one big reason the teachers union is opposed. I should note that Newsom says he does support a national wealth tax on billionaires, so it couldn't just drive the rich to move from one state to another.

SIMON: Is there some potential political peril for a Democrat like Governor Newsom opposing the tax at a time when, according to polls, Americans are increasingly concerned about wealth inequality?

LAGOS: I've been asking the same question. It certainly seems like a risk for Newsom, who's thought to be eyeing a presidential run in 2028. Like, will voters believe him? Will they make a distinction between a state billionaire tax and a federal one? I spoke with Jim Kessler at Third Way, the center-left think tank. He thinks this could actually play to Newsom's advantage if he runs in 2028.

JIM KESSLER: Because the top issue for Democratic primary voters in presidential elections is - is this person electable? And they don't think someone overly progressive is electable.

LAGOS: Kessler says if the proposition fails in California, it could be a setback for the goals of progressives and of taxing the rich. But he still thinks that basically every Democrat in 2028 will be running on some sort of platform of taxing the rich, so he doesn't see whatever happens in this race as definitive for the Democratic Party.

SIMON: Marisa Lagos from KQED. She co-hosts the podcast Political Breakdown, where they've been talking about Prop 40 and other midterm politics. Marisa, thanks so much.

LAGOS: Thank you.

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