California wealth tax would cause rich to flee, Newsom warns

CALIFORNIA Governor Gavin Newsom warned that a proposed one-time tax on billionaires will backfire by prompting the ultra-rich to leave the state. 

“The impact of a one-time tax does not solve an ongoing structural challenge,” Newsom said Thursday at a Bloomberg event in San Francisco. “You would have a windfall one time and then over the years you would see a significant reduction in taxes because taxpayers will move.” 

The potential levy has divided populist Democrats from the party’s more moderate faction - a camp Newsom has increasingly been associated with.

Progressives including Vermont Senator Bernie Sanders and California Congressman Ro Khanna have endorsed the measure, and New York Mayor Zohran Mamdani said this week he’s open to a similar tax. Newsom has said he supports a national wealth tax in principle but hasn’t made a specific proposal. 

“That’s an interesting conversation,” he said. “It’s a challenging one too.”

The labour union backing the measure, SEIU-United Healthcare Workers West, argues the tax is needed to offset tens of billions of dollars in projected health-care cuts from Congress. 

The potential billionaire tax is far from reality. Supporters must collect nearly 900,000 signatures to qualify it for the November ballot.

If they succeed, the proposal would likely encounter heavy opposition from a coalition of wealthy donors including venture capitalists Ron Conway and Peter Thiel, who are funding campaigns against it. 

Already, at least half a dozen billionaires left California ahead of a Jan 1 residency cut-off, and another 12 to 15 families plan to leave if it passes, Bloomberg previously reported. 

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Google co-founder Sergey Brin, a longtime friend of Newsom’s, has taken steps to leave California and has been linked to a recent Nevada mansion purchase.

He’s now bankrolling a pro-business political organisation with other tech billionaires that’s planning to oppose the potential ballot measure and shape other California policies, according to a person familiar with the matter. 

Asked if he’s disappointed about Brin and others leaving the state, Newsom said, “of course.”

“But obviously I think they’re disappointed in some respect as well,” he said. “I mean, it’s just a lot of anxiety out there.”

Newsom’s personal ties to other billionaires run deep. He considers Salesforce chief executive officer Marc Benioff “family” - Benioff is godfather to Newsom’s oldest child.

As for whether the wealth tax will make the ballot, Newsom said he was unsure. 

“They have the money,” he said. “And we’ll see.” BLOOMBERG