Would the billionaires of California really leave because of a one time tax? That is now the question that is boiling the political and business spheres in the state as labor unions roll out a plan to introduce a 5 percent emergency tax on the fortune of about 200 of the richest people in the state. According to the organizers, the measure has the potential to raise about 100 billion to cover far reaching healthcare cuts that will be implemented deep in federal healthcare by the year 2026.
The Service Employees International Union, which is the union representing the United Healthcare Workers, is leading the campaign and is setting it as a lifeline to the healthcare system that they are asserting is going to “collapse” due to annual healthcare Medicaid cuts in the tune of 20 to 30 billion over the next five years. “We are calling on California’s approximately 200 billionaires to step up”, said a spokesperson of the union Renee Saldana. The money would keep emergency rooms open, save millions of jobs and cover millions of people.
It has been supported by notable personalities such as Senator Bernie Sanders who described the initiative as a model that should be emulated nationwide, and Representative Ro Khanna, whose Silicon Valley constituency is home to most of the targeted billionaires. The stakes Sanders emphasized are high: “We cannot continue to tolerate a rigged economy in which 60% of our people live paycheck to paycheck… while the top 1% now owns more wealth than the bottom 93%”.
Governor Gavin Newsom has, however, expressed his rejection. In the New York Times DealBook conference, he cautioned on the isolation of California among other states, and that pragmatism was necessary. His political team has been claiming that the proposal is a bad political policy that threatens to destabilize the general fund of the state which depends largely on the high earners.
It would be retroactive to January 1, 2026 and would be assessed on net worth determined as of 2025 and payable over a period of five years, or 1 percent per year. Economists observe that this design inhibits motives to move, as the motivation to move after the snapshot date would not evade the bill. Emmanuel Saez of UC Berkeley estimates that the measure can still increase by approximately 100 billion dollars even with a 10 percent avoidance rate.
Those who oppose it in the tech industry have not been silent. Peter Thiel, a venture capitalist, and Google co-founder Larry Page have been reportedly considering a departure out of the state. Cofounder of defense technology company Anduril Palmer Luckey said the tax would cause founders to sell massive portions of their companies, and Y Combinator CEO Garry Tan forecasted a stampede of unicorns to other states. The issues revolve around taxing illiquid assets including shares in private companies which cannot be easily liquidated into cash. The Figma CEO, Dylan Field, warned that founders may be subject to a doubling of tax incidences in case they had capital gains liabilities too.
But it has been indicated through history that billionaire flight is not common. A study by Cristobal Young and Charles Varner based on California and New Jersey tax data revealed close to zero long term responses to tax increases in terms of migration. The trends in international business, as studied by Henrik Kleven and Emmanuel Saez, are not new: the rich who are associated with businesses, property and social networks are more likely to remain put, and evasion by reclassifying their assets is much more widespread than evasion by moving. According to one of the analyses of the migration of wealth tax, as was put, “paper moves more than people.”
It is not just a matter of billionaire balance sheets. The healthcare infrastructure of California is under intense pressure due to federal cuts introduced as a part of the “One Big Beautiful Bill” of President Trump, and the number of people who may lack Medicaid insurance is estimated at 3.4 million. Union leaders contend that without emergency funds, shutting down of hospitals, clinics and nursing homes will spread across communities adding to the costs in other sections of the system and undermining the health of the populace.
The politics is complicated. The allies of Newsom view his stand as one in line with a track record of standing firm on taxes which may help strengthen his future presidential bid. The moderate legislators respond that taking the side of billionaires would cause working-class voters to turn against them and undermine California’s capacity to cushion the effects of federal policies. In the mean time, supporters of the measure are scrambling to get the 874,641 signatures that they will require to make the November 2026 ballot and they are convinced that the public will back them up because majority of polls show that most of the people in the country support the tax on the wealthy.
The offer is a series of financial and symbolic hot spots to the tech elite of California. To unions and its supporters, it is an unusual opportunity to plow extreme wealth into pressing needs of the people. And among policy-followers it is a question of whether a state can create a wealth tax that would collect significant revenue without inducing the economic crash that its opponents are fearing.
