Can California Actually Make Billionaires Pay?

0:00And we're live from the living room as Doug eyes up the matchday spread. He's reaching for the Buffalo wing. Perfect. Hang on, what's this? Oh, he's going for a can of Pepsi too. Incredible. What a finish. Sensational combination. Look at the delight on his face. There's no doubt about it. It just tastes better. Matchdays deserve Pepsi. Food deserves Pepsi. Grab a pack of Pepsi Zero Sugar for today's match. It's poetry in motion. Some personality quirks are really funny. Like, I talk to my left foot more than I talk to my right. You know what's not funny and not a personality quirk? OCD. Although the term OCD is widely recognized, it's misunderstood by most people.

0:44It doesn't mean being tidy or clean. It's having obsessive fears, thoughts, and urges. You question your character. You question your safety. That's OCD. Breaking the OCD cycle takes effective treatment. Go to NoCD.com to learn more. The grill is shot. The chairs are held together by optimism. And what happened to the rug? Sounds like your outdoor setup is not ready for patio season. Fix it all with Wayfair. Shop Wayfair for grills, rugs, furniture, and more. With 20 million five-star reviews, room of choice delivery, and expert setup on qualifying orders, it's never been easier to do more for less.

1:22Get 10 % off your first eligible purchase. Hurry to Wayfair.com or download the app now.

1:35Hi, Dave. Thanks so much for being here. Hi, Tyler. Thank you for having me. So Prop 40 would tax the net worth, not the income, but the net worth, of California's billionaires one time by 5%. If it passes, it'll be the first tax like this to ever actually be enacted by a U.S. state. But the idea or similar ideas have a long history of not passing. Elizabeth Warren has been introducing versions of a federal wealth tax since 2019 to no avail. California has even tried this before, albeit through the legislature, but the taxes always died before reaching a floor vote. Prop 40 skips the legislature entirely and goes straight to the voters.

2:14Is that the real innovation here, like not the tax itself, but the vehicle you're using to get around the people who keep killing it? I think that's fair. And, you know, as you said, when you try to introduce measures like this through a legislative body, the power of organized money, even in blue states like Massachusetts, like California, and certainly in the United States Congress, forget a floor vote, you're not getting a committee hearing. And so it's actually correct. There is nothing legally innovative about what we're doing. This is established law for more than a century in the United States.

2:59What's different is that we're bypassing a legislative body. We're going right to the voters and we're going to put it in front of them. And that is the first time that's ever happened. And obviously, when we succeed, it will be the first time anything like this has ever been accomplished in the country. That's Dave Reagan, president of SEIU United Healthcare Workers West, the union behind Proposition 40, a ballot measure in California that would impose a one-time 5 % tax on the net worth of billionaires living in the state in order to raise an estimated$100 billion for health care. If the tax were to pass, then it would genuinely be the first of its kind.

3:40The sheer idea of it has sent some of the wealthiest people in the world into a panic. Sergey Brin, Eric Schmidt, and a small army of Silicon Valley billionaires have already poured$100 million into efforts to combat the tax. Governor Gavin Newsom, who also opposes the ballot measure, is worried about billionaires leaving the state altogether. I wanted to talk with Dave about the origins of the tax, how it would actually work, and the unlikely people who have come out in favor of the ballot measure and against it. Also, how does this fit into national conversations about economic populism and taxing the rich?

4:13Is this an extension of the same populist energy that recently got Zoran Mamdani elected in New York? Or is this something more specific to California, a health care fight wearing populism's clothes? This is The Political Scene. I'm Tyler Foggett, and I'm a senior editor at The New Yorker.

4:32So before we talk about the political battle lines that have been drawn here, I think we should start by talking about the mechanics of the tax and how it would actually work. So my understanding is that this tax would apply to anyone in California with a net worth of a billion dollars or more, which is currently a group of like 200 people. And in order to prevent these billionaires from escaping the tax by fleeing the state, the measure is supposed to apply retroactively. Can you explain this whole retroactive thing and how that works? Yeah, it's really not something that you could classically call retroactive.

5:05The tax applies to any resident of California with a net worth of$1 billion as of January 1 of 2026. There's lots of taxes. You know, because we're voting in November of 26, it happens all the time that the legislature or local ballot initiatives go back to the beginning of the calendar year that they're voted on. So from our point of view, it's really not a retroactive tax. It's just following a well-established pattern. It's a little more than 200 people. It's between 200 and 250, but it's a tiny group of people relative to the population, but it's people who were legal residents as of January 1.

5:50And establishing legal residency, for anybody that ever looked at sending their children to college, you know, some of the billionaires say, well, you know, I moved to Nevada. You know, a handful of people have said that in December. Well, you can't move to Nevada in December and enroll your child as a state resident in the university because you've been there for a week. And so that's the best analogy we would use, but those are the mechanics of who it applies to and how it would work. Just going back to the idea that this would affect 200 to 250 people roughly, not that I want to imply that billionaires are, you know, like the small guy that they don't already have a ton of power, but I guess I'm just struck by the idea of a policy that a democratic majority imposes on a group that's too small to actually defend itself at the ballot box.

6:42And again, very weird to like be referring to billionaires as small, but like just this idea that it's 250 people who obviously can't all just like show up and vote against it. It's like everyone else against them. Like, is there anything weird about that? Or do you think that the tax can be characterized as just? I think the tax is absolutely just, and here's why. The best research that exists about billionaires, this tiny numerical group of people, is they pay substantially lower effective rates of taxes than the vast majority of the population. I pay an effective rate of somewhere around 40 percent.

7:22People who are professionals, registered nurses, accountants, construction workers, 38 to 42 percent is totally normal when you look at federal and state taxes in California. The billionaires pay 24 percent. And frankly, our system has been so warped that the people who have benefited enormously from this system the most are billionaires. There may be few of them, but their power to craft the tax system in a way that benefits them unlike anybody else in the population I think is undeniable. And I think this is more than just. I think this is a totally common sense thing, and it's in response to a public policy crisis in our health care system.

8:09And the other thing everyone just needs to know about billionaires, just the California billionaires, seven years ago in 2019, their aggregate wealth was$700 billion. Today, seven years later, it's over$2.2 trillion. Registered nurses, teachers, firefighters, construction workers. That's not happening to the regular population. And moreover, that 200 plus percent is effectively off limits from our existing tax system because it is not designed to deal with that sort of an upward surge in gargantuan wealth. So is it just? There is no question it's just. The only injustice here is that it's taken us this long to get to it.

8:57This idea of the tax system not being structured to kind of account for that surge in wealth, is that the reason why the focus here is taxing wealth as opposed to reforming California's income tax to ensure that billionaires are paying more? So, again, the billionaires are like unicorns, to use a word that we hear in the finance world. Or that they're very familiar with, yeah. Yes, absolutely. And what's completely unusual about them is they don't rely on wages or salaries, like the vast majority of the population. They rely on their assets. And we tax assets in California, in the United States, much less aggressively than we tax wages and salaries.

9:40That's why their effective tax rate is basically half of what even affluent, very well-paid professionals that most folks would say are quote-unquote rich. So that's just the reality of this, and they just live in a different world than the rest of us. Their money earns money in a way that is completely unprecedented in the history of the country, in the history of our state, and frankly, in California, the home to more billionaires than anywhere else in the United States. It's the dynamism of Silicon Valley. And Silicon Valley is not something that was created by the billionaires. Silicon Valley created the billionaires, and that's a process of the workforce, the public educational system, the University of California system, the attractiveness of California as a place that people want to come to, and this long history.

10:33And what's changed, even as we see all of this economic dynamism, is our tax system has become more anachronistic. And that's why we think this is, you know, it's necessary and it's also completely fair and commonsensical. So the 5 % tax, it's all based on someone's net worth. Correct. And I guess I'm wondering, like, how do you actually value someone's net worth in a single tax year and who's doing that valuation? Like, I was Googling, like, Larry Page, and I'm not going to say that he's not a billionaire. Obviously, he is one. But when you Google him, his net worth is estimated to be between$179 billion and$295 billion, which is like a huge range if you're trying to apply a 5 % tax to that.

11:13So, like, how does that work? So, the organization or the group that has the responsibility for answering those questions is something called the Franchise Tax Board in California. This is the public state agency that sets tax rates, enforces them, deals with compliance issues, is our collector of taxes in the state. Because there are so few of these people, but just like you and I, they file their taxes every year. The thing that's really surprising about it though, at this level of wealth, 70 % of the assets are in publicly traded stocks. And you can see the price of them every single day at the closing of the markets.

12:00It is completely transparent. 30 % is in privately held corporations or real estate trusts, that kind of thing. But every year, they file their taxes. There is a history of this. Again, what's different is this is the first time we're saying that, you know, these things are subject to this one-time emergency tax. But the residency requirement is on January 1 of 2026, and the valuation date is December 31 of 2026. And there just has to be a simple accounting. But it is much simpler than most people think it is, and frankly, that's because over two-thirds of the net worth of this$2.2-plus trillion, we can all look at the closing prices of the stock exchange every day and see what it is, and then it's a relatively simple calculation to do the rest.

12:55I mean, are there legal complications that you're concerned about? Like, I know that you were saying that you kind of reject this framing of it being a retroactive tax. But it does seem like, given that this will apply to people who were residents of the state on January 1st, 2026, and maybe that person has left since then, that retroactive is, I mean, it's kind of the only word that I can think of to use for it. And given that, you know, I'm like not a legal expert at all. But I know that there's a Supreme Court precedent allowing for retroactive adjustments to an existing tax, but that under U.S.

13:27constitutional law, a wholly new tax cannot be imposed retroactively. So are you concerned about, you know, this potentially passing and then being struck down by the Supreme Court? Like what are the concerns? Frankly, we're not concerned about that at all. And the reason for it is it is settled law. the features that you just described properly are completely standard and normal for a whole range of taxes that have been assessed and collected and, you know, part of the regular life of California for some time. There's nothing legally innovative here. But because we're confident and because we're facing a health care crisis in California, what we've built into our initiative, and we expect a legal challenge when it passes, is that we've fast-tracked the legal challenge to go right to the California Supreme Court.

14:19We want the issue to get adjudicated as quickly as possible. And after the California Supreme Court, there's only one other stop on the line, and that's the United States Supreme Court. What the lawyers will tell you, and I got a whole education in this, is that when you go from a state Supreme Court to the United States Supreme Court, the grounds for overturning a state Supreme Court decision are much narrower than if there was some other pathway to get there. So we think this is totally normal, standard in terms of the legal principles. Again, the only thing different is the individuals who are the wealthiest people on planet Earth.

15:02That's what's different. Their ability to pay, not a question. The need in order to make sure we don't have a collapse of our healthcare system, not a question. Everybody agrees on the problem. And so because of the individuals involved, we expect a challenge and we've done everything we can to accelerate that. The only other thing I should say is to have standing to challenge the law, you have to first pay the tax. And that's also built into the initiative. That's very clever. Well, you know, we have very good lawyers and very good folks who've worked on this. You've mentioned California's health care crisis a number of times.

15:42And you've explicitly framed this tax as a response to cuts in the one big, beautiful bill. Can you talk a little bit more about those cuts and particularly what was affected and how this tax is meant to address those? Sure. And, you know, I think it's important that people realize the reason we're doing this is not because we wanted to pick a fight with billionaires. It's not because we wanted to antagonize billionaires. It's because on July 4th of last year, President Trump signed the one big beautiful bill which took$1 trillion out of the American health care system, particularly the Medicaid program, which is the largest health insurance program in America, much bigger than Medicare.

16:28Over 80 million people are covered by Medicaid. The effect of that legislation, the worst features of which have been delayed until after the coming midterm election. So the full effect of this is going to hit on January 1 of 2027. But in California, that's going to remove$100 billion from essential health care funding for individuals, for providers, for coverage. And there is a consensus view. The predictions in California are three and a half million people are going to lose health insurance, both people who are on what's called Medi-Cal in California, but also people who buy their insurance on the individual market through the Obamacare exchange plans.

17:12Three and a half million people lose coverage. 150 ,000 health care workers will become unemployed. Consumers who get their health insurance through job-based coverage in the commercial market are already paying higher premiums, deductibles, and co-pays. So it is literally the case that the vast majority of the population in California is either starting to already pay significantly more for health care, facing the loss of insurance, all of the instability that comes with that. We've got over 80 hospitals that are on the verge of financial insolvency. insolvency. This is real. And I think we just haven't like fully absorbed how large these cuts are and how destabilizing they're going to be.

18:02And not just in California, but in the other 49 states as well. This is a national problem because this was congressional legislation that set off this whole episode. So you raise like an estimated$100 billion with this tax, and then that money is supposed to go to health care. But how does that actually work? I guess what then actually happens with the money? So because the tax cuts that were financed in President Trump's big, beautiful bill, those overwhelmingly went to the wealthiest Americans, and it was cuts to health care to finance those. So health care is what has to be restored. And, you know, the numbers I shared a moment ago, that's the effect of this.

18:47So our measure says 90 % of the$100 billion goes to healthcare, 10 % goes to food assistance because we are also seeing reductions in nutrition programs, what's called the SNAP program, not just in California but around the country, and some money to public education as well. So 90 % for healthcare, 10 % for food assistance and public education. The way it works is the legislature under the measure is required to spend the money to fix the consequences of the cuts in the healthcare area, the food assistance area, and the public education area. They have discretion to use the resources to deal with what actually is the fallout from all of this.

19:36What they do not have the discretion to do is take the money from health care and say we're going to go do something else that might well need to be done. But if we don't fix health care, then resources for everything else that is done in the state, too, are going to be compromised. In a moment, we'll talk about the origins of this tax and then the people who are lining up for it and against it in California. This is the political scene from The New Yorker.

20:18So, Dave, you're frequently described as the architect of this tax. What exactly does that mean? And I guess who are the main figures or organizations that you've been working with to draw up the proposal and get it on the ballot? So I am the elected president of the Service Employees International Union, United Healthcare Workers West, SEIU, UHW. So I'm the president of the union. We have 125 ,000 healthcare workers who are the members of our organization in California. Every single one of our members is a caregiver and by definition works for a healthcare provider, whether that is a hospital, a clinic, a dialysis clinic, a long-term care facility, a home care agency.

21:06Every single person in our organization is working for an employer that gets some amount of its funding from health care and from particularly the Medicaid program. And so we worked very hard a year and a half ago to try to defeat the one big beautiful bill, which only passed by two votes in the House of Representatives, then was signed by the president, and we didn't succeed. And so we created a work group and we talked to as many people as we could find, health care providers, health care policy people, tax attorneys, economists. And when you're dealing with something of this magnitude, something on the order of$25 billion a year, there's only so many places you can go to.

21:55And one of the things we learned quickly and particularly from some of the economists we work with is that fact I shared a few minutes ago that this group of 200 or so people, 700 billion to 2.2 trillion in seven years. And so we need$100 billion to stop devastating cuts. And literally, I'm not trying to be melodramatic, but when that number of people lose coverage, they forgo treatment and there will be people who lose their lives unnecessarily. And California is such a dynamic place and it has this incredibly powerful tech sector in particular and economy. And we just think this is fair. And so, you know, I get called in some stories the architect because I'm the president.

22:43But the truth is this was something that was demanded by the members of our organization, the leaders of our organization. And frankly, this was a no-brainer for them. And these are folks who all worked through the pandemic and who felt like maybe we've now escaped that last crisis that we had in health care and now out of the frying pan into the fire. Here we go. So who are the major politicians and political organizations or activist organizations who agree with you that this is a no-brainer? Like who have you been getting most of your support from? So the most prominent people are Senator Bernie Sanders.

23:21He came out to Los Angeles earlier this year when we did a kickoff event and he addressed the group of people that were there. Congressman Ro Khanna from Silicon Valley has been an incredible supporter. Other unions have been very supportive. We have the support of AFSCME in California, the Teamsters, the hotel workers, the California Labor Federation will be voting in a few weeks on the position it's going to take. We're optimistic about that. And the other thing we know is that every demographic group that you can identify in California. Age, race, income level, only one exception, everybody supports the billionaire tax except for registered Republicans.

24:11Democrats, independents, people who are senior citizens, young people, over$100 ,000 a year, under$100 ,000 a year, this is actually widely popular. How do you explain Governor Gavin Newsom's opposition? I think, look, just to be candid, and I've told this story, but I'll tell it again. Governor Newsom called me right before Christmas last year. I went in to meet with him, and he said, I'd like for you to withdraw the billionaire tax initiative. This is before we had gone out and started to collect signatures. And I said, Governor, we are trying to solve a problem. Do you have a solution to the problem?

24:57And by the way, our work group met with his policy team and those statistics about the number, the three and a half million people projected to lose coverage, 150 ,000 jobs lost, people paying more, hospitals and clinics closing. He said, we agree. There is no disagreement about the problem. And I said, well, do you have a solution? Honest to God, he said, I don't have a solution. Governor, we need a solution. This is real. And I know, you know, he said he was getting calls from some of the billionaires. I said, well, I talked to thousands and thousands of healthcare workers, and I talked to patients.

25:38And we have to believe that the preferences of the great majority of the population are at least equally as important as a couple of hundred billionaires. And so I think everyone knows the governor is running to be the president of the United States. Everyone knows that the people he intends to raise the money from are the wealthiest people in the tech industry in California. I'm not trying to be unkind. I just think it's true and we have to state the obvious. The governor is out of office come January 1. It is the next person's problem. And Governor Newsom right now, to be candid, is more concerned about campaigning for his next job than really taking seriously the health care challenge that we have.

26:30And I think he's made a mistake. I think it's unfortunate. We are disappointed. But this is real, and we're going to do what we think is right. I mean, Newsom would probably say that his opposition has more to do with the possibility of the wealthy leaving the state. And I guess I wonder, I mean, since there is this, the tax is meant to apply to people who were residents of California on January 1st, you know, 2026, like, is that not kind of like a tacit acknowledgement that the state's highest taxpayers fleeing because of this tax is very much a possibility? No, no, no. It's actually the opposite of that.

27:07The reason that we did it as a one-time emergency tax is because we're facing this catastrophe in our health care system. and we were well aware that the first argument people are going to make, and by the way, all of the evidence, all of the research says this isn't true, but the reason we made it a one-time tax is we wanted to take away all incentive to actually leave the state, and what we're saying to the billionaires and what we're saying to the governor is we have a genuine crisis here. We don't have a lot of time to figure out how to solve this, but we're going to put forward a five-year solution, something that provides the resources for five years.

27:50And because it applies to people who were legal residents of the state on January 1 of 2026, they're here. They're here already. You can say you're going to become a legal resident of somewhere else, but you're going to be subject to this tax. So we wanted to take that argument away, and we wanted to say we're trying to solve a problem. We're not trying to agitate or gratuitously antagonize billionaires. But tens of millions of people in healthcare coverage and security is important. And so I think it's just the opposite. And I also think the governor knows that this is not a real argument. This is a red herring.