Controversial billionaire tax proposal declared eligible for the November ballot

A controversial proposal to tax California billionaires to fund healthcare has tenatively qualified for the November ballot, setting the stage for a more intense and expensive battle over whether the state should squeeze the ultra-rich.

Supporters say the proposed tax is crucial to compensate for federal healthcare funding cuts, approved by President Trump and the Republican-controlled Congress, that will harm millions of the state’s most vulnerable residents.

In April, supporters of the billionaire tax submitted nearly 1.6 million signatures, roughly double the number needed to qualify. The California secretary of state’s office on Wednesday declared that enough valid signatures were submitted. The initiative will officially qualify for the Nov. 3 ballot on June 25 unless the proponents withdraw it beforehand.

The initiative would imposea one-time tax of up to 5% on taxpayers and trusts with assets valued at more than $1 billion, with some exceptions, such as property. The levy could be paid over five years. Ninety percent of the revenue would fund healthcare programs, and the remaining funds would be spent on food assistance and education programs. The proposal would cost the state’s richest residents about $100 billion if a majority of voters support it.

Opponents of the measure say the proposal is an ineffective attempt to address the long-term effects of the healthcare cuts and would destroy California’s economy and budget.

The state budget in California is already largely dependent on income taxes paid by its highest earners. Because of that, revenues are prone to volatility, hinging on capital gains from investments, bonuses to executives and windfalls from new stock offerings, and are notoriously difficult for the state to predict.

The proposal already triggered a fierce debate, accentuating the divide between the rich and poor in a state that’s expensive to live in.

The Service Employees International Union-United Healthcare Workers West and other supporters of the billionaire tax say that it would raise $100 billion, offsetting federal funding cuts to healthcare as well as funding education and state food assistance.

But supporters face strong opposition from billionaires with deep pockets. Tech executives and other business leaders oppose the idea and have threatened to move to other states. Opponents say taxing billionaires would harm California’s economy while not addressing underlying financial issues.

The proposal also has divided politicians within the Democratic Party. California Gov. Gavin Newsom spoke out against the billionaire tax, expressing fears that billionaires would move out of the state. But U.S. lawmakers such as California Rep. Ro Khanna and Vermont Sen. Bernie Sanders have backed a billionaire tax, saying the rich should pay their fair share to fund essential services.

Business executives have already poured millions of dollars into groups that oppose the billionaire tax or are promoting alternative solutions to wealth inequality.

Tech executives, venture capitalists and business leaders have donated roughly $118 million to a nonprofit called Building a Better California, according to data on the secretary of state’s website. Most of the funding comes from Google co-founder Sergey Brin, who has given more than $82 million to the group. Executives from DoorDash, Ripple, Stripe and other companies also have contributed.

The group says it supports policies such as expanding access to affordable housing, protecting innovation, requiring government transparency and securing more stable education funding.

PayPal and Palantir co-founder Peter Thiel has contributed $3 million to the California Business Roundtable, which opposes the tax. Former Google Chief Executive Eric Schmidt donated $1 million to that group as well.

California would probably collect tens of billions of dollars from the wealth tax if it passed, but it could also lose other tax revenue, a December letter from the state legislative analyst’s office said. The office also mentioned that it’s tough to predict the exact amount the state would collect because of factors that can affect a billionaire’s wealth such as fluctuating stock prices.

California billionaires who were residents of the state as of Jan. 1 would be affected by the ballot measure if it passes. Some wealthy residents announced plans to moves out of state. On Dec. 31, venture capitalist David Sacks announced that he was opening an office in Austin, Texas, the same day Thiel publicized his firm had opened a new office in Miami.