The San Diego Union-Tribune Editorial Board understands there is a significant pent-up desire among millions of progressive voters for a much better-funded and more generous state government — one less likely to be buffeted by the hostility of the Trump administration. To achieve this goal, California’s coffers will need a huge new infusion of funding.
But not all tax hikes are created equal. Proposals to tax capital gains of upper-income residents upon their deaths, to tax individuals based on consumption of luxury goods or to broadly tax services — not just goods — all have their downsides. That said, they don’t come with the risk that they would both hammer an entire state economy and could actually end up reducing state revenue.
Which brings us to just such a measure: state Proposition 40, the “billionaires tax.” There is a reason that so many liberal and moderate state groups and organizations — starting with the California Teachers Association — strongly oppose the SEIU-United Healthcare Workers West’s call to impose a purported “one-time” 5% levy on billionaires’ net worth, retroactive to Jan. 1, 2026. There is a reason that the Tax Policy Center — a think tank operated by the Urban Institute and the Brookings Institution, stalwarts of the progressive establishment — is skeptical of broad taxes on wealth. That reason: Those who sweat the details realize that such taxes put a bull’s-eye on the backs of the job-creating entrepreneurs that every elected leader should covet.
If Proposition 40 passes, the most successful ones would be forced to pay millions in taxes for companies they own that have substantial valuations but before they have ever made money. It’s hard to conceive of a tax policy more likely to discourage investment in the Golden State than the SEIU’s assault on the basics of the free market.
But the union’s proposal is far more radical than it appears at first glance. Unlike most wealth taxes, it would require the state to tax people for property they don’t own. (No, that is not a typo.) Entrepreneurs routinely create two separate classes of corporate stock, with one class having far greater weight in shareholder votes. This lets them maintain majority control despite owning a minority of total shares.
But as we wrote in February, “The lawyers who crafted the SEIU proposal saw taxing billionaires based on how much of a company they control rather than how much they actually own as an easy way to get a much bigger chunk of their wealth than 5%. The result: The Tax Foundation found that DoorDash founder Tony Xu — who owns 2.6% of his company but controls 57.6% of shareholder voting power — would have to pay not 5% of his total wealth but 109%.”
No wonder the first, second and eighth richest Californians — Google co-founders Larry Page and Sergey Brin and PayPal co-founder Peter Thiel — moved out last December. No wonder independent analysts suggest the short-term windfall from the allegedly one-time tax would eventually be dwarfed by the revenue lost due to the exodus of the individuals and companies who have built the Golden State economy into the world’s fourth-largest. No wonder legal experts doubt the U.S. Supreme Court would uphold the constitutionality of a confiscatory retroactive tax that any capable attorney could depict as the SEIU’s assault on the basics of due process.
But will the powerful argument that Proposition 40 is sure to backfire even matter to most Californians desperate for change — whether it’s rational or not? Probably not. Here’s hoping they are outnumbered by the state voters who can still think straight.
The U-T Board opposes Proposition 40. We support Propositions 41 and 42, measures related to state taxes that would override Proposition 40 if they got more votes. That Propositions 41 and 42 were sponsored by billionaires doesn’t make them bad ideas — at least to those who understand the threat that Proposition 40 is to life in California as we have known it.