Instead of uniting the left, California’s millionaire tax measure has divided Democratic allies

SACRAMENTO – With all of the media attention on California’s proposed billion-dollar nationalized tax — some blasting it as a stupid Left Coast attack on American business — the November ballot item has created tension between progressive labor unions and Democrats, the groups most critical to the measure’s success.

Championed by California’s largest health care workers’ union, Proposition 40 would impose a one-time, 5% tax on California’s approximately 200 billionaires. The measure aims to reverse the Medicaid cuts signed into law last year by President Donald Trump, and would raise about $100 billion in funding.

Dave Regan, the measure’s architect and president of the Service Employees International Union-United Healthcare Workers West, said the tax is intended to prevent “the imminent collapse of California’s health care system due to Trump’s cuts in the ‘One Big Beautiful Bill.'”

Regan, who has become famous for using polling methods as leverage in negotiations with state lawmakers and the health care industry, appeared ready to convey public concerns about poor economics, access to health care and anti-Trump sentiment when the plan was announced last fall.

Today, however, this plan not only faces stiff and well-funded opposition from those it aims to tax, but also divided support among groups that generally favor taxing the rich – 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. Other unions have yet to weigh in, including the California Federation of Labor Unions and SEIU California, the parent organization of Regan’s health workers union.

The Democratic establishment is also divided. Gov. Gavin Newsom strongly opposed the measure and sought to negotiate with Regan to remove it from the ballot early last year. Days before the state’s deadline to repeal ballot measures in late June, Regan publicly offered to cut the wealth tax to 2% within two years, which Newsom quickly rejected.

To some observers, the request indicated that Regan may have been looking for a way out of a costly battle for the vote.

“I found it unusual for him to do that because he’s not that type of conversationalist — he’s not a slouch,” said Democratic Alliance political consultant Steven Maviglio. “I don’t know if you heard it was a hot potato or what.”

Regan’s union spent $31 million to collect 1.6 million voter signatures to put the tax on the ballot.

“At first, this looked like a repeat of a strategy that he had used successfully many times in the past, but he ended up painting himself into a corner, so now he’s stuck with a plan that he knows he probably won’t pass,” said Dan Schnur, a professor of politics and communications at Pepperdine, USC and UC Berkeley.

A March poll by UC Berkeley’s Institute of Governmental Studies showed that 52% of registered voters supported the billionaire tax, while 33% opposed it and 15% were undecided. However, campaign experts say her position remains tenuous, due in part to the deep pockets of her opponents.

Several billionaires, including Google founder Sergey Brin, have so far contributed $118 million to a campaign committee that has collected enough signatures to put two alternatives on the ballot aimed at cutting the billionaire’s tax bill.

Groups that might support more revenue for health care have also come out against Prop. 40, including Planned Parenthood Affiliates of California and the California Medical Assn.

“A dangerous wealth tax directly threatens critical funding for education and schools, health care and clinics, public safety, and infrastructure projects by further straining California’s finances,” leaders of the California Medical Association, California Primary Care Association and California School Boards Association wrote in a joint statement.

Regan and other supporters insist that, without passage of the tax measure, Trump’s “Great Bill” will eat away at federal health care resources.

“This will take between $20 and $25 billion annually from our health care system, meaning 3.5 million people will lose insurance, 150,000 health workers will be laid off and more than 20 million consumers will already be paying more in premiums, deductibles and copays,” he said.

Although prominent developments such as Sen. Bernie Sanders (Vt.) and Rep. Ro Khanna (D-Fremont) has expressed support for the measure, while other progressive opponents say its exclusive focus on health care is problematic. (Only a small portion of tax revenue goes to education and food security.)

The CTA said that after reviewing the measure, the council of delegates “determined that this policy will not provide the sustainable and long-term funding that our schools and communities deserve.” Leaders of the state’s largest teachers union plan to focus their efforts on passing Proposition 3, which would permanently end the existing tax on high-income earners to fund public schools and colleges.

Labor unions are generally aligned in support of tax-increase ballot measures, including earlier interim versions of Prop. 3 and the failed 2020 proposal to renew commercial property taxes.

But the billionaire tax “doesn’t benefit everybody. It benefits workers in the health care sector in particular, and I think that’s why not everybody is on board. It’s not a ‘rising tide that lifts all boats’ kind of proposal,” Maviglio said.

In the 15 years he led SEIU-UHW, Regan was known for using expensive ballot measures — or the threat of them — to bring lawmakers and industry opponents to the bargaining table.

In a landmark 2023 deal, Regan secured a statewide minimum wage of $25 for health care workers after a fair effort to raise wages in the industry in Los Angeles and other cities. The agreement included a 10-year moratorium on minimum wage proposals. He also pushed for voting equalization laws at kidney cleansing clinics in the next three election cycles. Although none of them passed, the dialysis industry spent hundreds of millions between 2018 and 2022 to defeat them.

“Everybody knows he’s using ballot measures as a weapon to advance his union or political agenda. It’s no secret. He’s admitted it,” said Brandon Castillo, a poll strategist who often finds himself facing Regan in ballot battles including dialysis clinic proposals.

The estimate uses a tax on billionaires who lived in California as of Jan. 1. Newsom and other opponents say the measure will drive the wealthiest out of government and their departure will blow a hole in the state budget.

California’s budget depends on taxes that the wealthy pay for stock market gains. The Legislative Analyst’s Office said the move would “likely” result in “a continued decrease in federal income tax revenue of hundreds of millions of dollars or more annually.”

“You may not be able to move to Texas or Florida to shelter your income from taxes, but I promise you millionaires can, and do,” Newsom wrote in a post on Substack in late June. “Wealth is removed, and it buys the state at a very low tax rate.”

After negotiations ultimately failed to lead to an agreement, Newsom proposed the idea of ​​a national wealth tax instead.

“It’s easy to see how they might have believed that Newsom’s strongest motive was to stay out,” Schnur said. “There is a big potential downside to the Democratic Alliance governor [to weigh in] on both sides of this system. If you oppose it, you are dividing your base. If you support it, you are putting your situation at great financial risk.”

Focusing on raising taxes at the state level allows the governor to support a nationally popular opinion, which he can campaign on when running for president. His opposition to the measure in California could leave him vulnerable to criticism from progressives in the Democratic primary.

Times staff writer Taryn Luna contributed to this report.