Top image: Gov. Gavin Newsom, April 2024. Photo: U.S. Bureau of Reclamation (public domain) via Wikimedia Commons
California’s billionaire-tax fight was always going to be about Silicon Valley money. Gov. Gavin Newsom’s decision last week to back the measure written to kill it has made it about Silicon Valley relationships too.
The endorsement
On Friday, Oct. 9, Newsom endorsed Proposition 42, CalMatters reported. The measure would cancel out Proposition 40, the proposed one-time 5% tax on the assets of billionaires who were California residents on Jan. 1, 2026. It would also go further, banning new taxes on personal property of all kinds, from investments and business holdings to art collections. Google co-founder Sergey Brin funded Prop. 42 and placed it on the ballot.
“We all agree that Californians deserve to have their retirement and life savings protected from new state taxes so those savings are there when they need them,” Newsom said in a statement released by Prop. 42’s backers, who include police and fire unions.
The money behind it
The scale is unusual even by California standards. According to a CalMatters explainer, Brin has put more than $138 million into opposing Prop. 40, including two countermeasures, Props. 41 and 42. Opponents together have raised more than $205 million. The tax would apply to the state’s roughly 200 billionaires. Of the revenue, 90% would go to a healthcare fund meant to backfill federal Medi-Cal cuts that state officials project could reach $30 billion a year.
The Legislative Analyst’s Office describes Prop. 40 as a one-time tax based on residency as of Jan. 1, 2026. If both Prop. 40 and Prop. 42 pass, the one with more “yes” votes takes effect, according to CalMatters.
The relationships
CalMatters reported that Brin has never donated to Newsom but has known him for years. The two attended each other’s weddings. The endorsement aligns the governor with tech donors he has known since his time as San Francisco mayor. It also puts him at odds with the California Democratic Party, which endorsed the tax.
The criticism came from inside the region. Rep. Ro Khanna, whose district covers much of Silicon Valley and who is, like Newsom, seen as a possible 2028 presidential contender, said donor relations were the “only reason” for Newsom’s opposition to the tax. “You can’t be anti-Trump and then do the bidding of Trump donors,” Khanna said in a video. SEIU-United Healthcare Workers West, the union funding Prop. 40, called the endorsement a sign Newsom would “rather millions of children and families lose their healthcare than ask a couple hundred billionaires to finally pay their fair share,” in a statement from vice president Debru Carthan.
Newsom has long opposed state-level wealth taxes, warning that wealthy residents would leave. This summer he instead proposed a national tax on the wealthy, including a minimum rate for anyone worth more than $100 million, CalMatters reported.
The long view
Prop. 40 has become a referendum on the relationship between California and the fortunes its tech economy created, which no single election will settle. A Hoover Institution analysis cited by CalMatters estimates that billionaires representing 30% of the tax base have already said they left, lowering state revenue estimates by $60 billion. Whatever happens in November, the question of how a state taxes extreme, mobile, mostly unrealized wealth will return, and Silicon Valley will again be paying for both sides of the argument.
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