Desperate Times: ‘If We Do Not Do This … There Will Be Tragedy After Tragedy.’

If the recently proposed 5% tax on California billionaires to raise $100 billion and offset projected federal Medicaid cuts beginning in 2027 sounds desperate, it is. 

As Dave Regan, a union leader and one of the measure’s proponents, put it during an Oct. 23 news conference, the ballot initiative to tap the wealth of the state’s richest residents is the “only solution anyone can see.”

The desperation driving that effort, though, is nothing compared with what Californians will experience if the Trump administration’s massive planned reduction in Medicaid funding becomes reality without a plan to replace that funding.
 

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It’s that prospect that ought to keep Californians up at night, not the question of whether 200 billionaires in the state can handle a one-time tax on a fraction of their collective wealth, which the measure’s supporters claim is around $2 trillion.

Is the idea a Hail Mary solution? Oh, absolutely. It requires the valid signatures of roughly 870,000 registered voters to qualify the measure for the November 2026 ballot, and many millions more California voters would then have to approve it. 

In broad terms, the logic behind the measure echoes the electoral drama playing out in New York City, where mayoral candidate Zohran Mamdani, a democratic socialist, has drawn outsized attention with his proposals to tax the wealthy and corporations to pay for programs like free universal child care and public transportation, and subsidized food markets. Mamdani’s focus on buying power and the cost of living has led him to frontrunner status against former New York Gov. Andrew Cuomo.

California’s 2026 Billionaire Tax Act, as it’s called, will spark plenty of pushback — and that could start with Gov. Gavin Newsom, who has long opposed any such plan. But the alternative could be darker still: an existential threat to the collective well-being of the Golden State, with no obvious way to deal with it.

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It’s difficult to overstate the impact of gutting federal Medicaid funding. California’s version of the program, Medi-Cal, provides free or low-cost health coverage to nearly 15 million residents — more than a third of the state population. That total includes more than 5 million children.

Research by the California Budget & Policy Center indicates that congressional Republicans’ “One Big Beautiful Bill” will erase $30 billion a year in federal Medicaid funding to California alone. 

Unless the state finds a way to make up some or all of that funding, roughly 3.4 million Californians could lose their Medi-Cal coverage. The One Big Beautiful Bill also limits a program California has often used to finance much of its own share of Medi-Cal costs.

The ballot initiative, which is strongly backed by health care workers, including members of the Service Employees International Union-United Healthcare Workers West, asks voters to approve the one-time tax on the subgroup of residents with a net worth in excess of $1 billion. (Disclosure: The SEIU is a financial supporter of Capital & Main.)

“If we do not do this, millions of people are going to lose health care, an untold number of people will go without treatment and there will be tragedy after tragedy,” said Regan, the union’s president. “We are facing literally a collapse of our health care system here in California and elsewhere.”

That would include the loss of plenty of health care jobs — up to 145,000, according to an April estimate by the UC Berkeley Labor Center. Rural hospitals, already under siege financially after years of low Medi-Cal reimbursement rates and high operating costs, would be pushed to the brink of failure without the volume of patients many of them rely upon. 

The cost of unpaid medical services to providers would skyrocket, as patients who no longer can afford to see the doctor would wait until they need far more costly emergency care, and California’s state budget can’t absorb the funding loss.

Hence the plan to tap the massive wealth that is concentrated in a few households — and which has been growing at an astounding rate in recent years.

Mark Zuckerberg, founder and chief executive of Meta (Facebook), saw his net worth explode to $206 billion in 2024 — a gain of $78 billion that year alone, thanks largely to stock gains. This year, the net worths of Alphabet (Google) co-founders Larry Page and Sergey Brin have increased by $66 billion and $60.7 billion, respectively, in just under 10 months.

Zuckerberg, Page, Brin and other tech billionaires — Nvidia’s Jensen Huang, Oracle’s Larry Ellison — are familiar names to many Californians. But the point isn’t that they’re famous; it’s that they’ve been able to grow their fortunes at rates many multiples beyond average California earners, which puts them in the unique position of being able to afford a nonrepeating tax on wealth that normally lies beyond the state’s reach.

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The rich in California pay a disproportionate share of the state’s income taxes. By one estimate this year, the top 1% of income earners account for nearly 40% of that total — a strong indicator of the gaping and increasing wealth inequality in the state. But the key word there is “income,” and as any wealth adviser could tell you, that’s not where most of these fortunes are concentrated.

Most billionaires’ wealth is not related to income. Rather, it’s accumulated in stocks, real estate, trusts, offshore holdings — many areas through which individuals can avoid paying direct taxes in some cases and lessen their tax burden in others.  

This ballot initiative is unlike a standard tax increase because it targets not the billionaires’ income, but their total wealth as accrued in all of those areas — a tack that hasn’t been taken in this country before.

Like Mamdani’s plan in New York, this one will draw the argument that taxing the rich will prompt them to leave for friendlier locales, as Tesla founder Elon Musk did a few years ago in moving to Texas and realizing a huge tax windfall. 

“Even if it’s a one-time tax, it would increase the chances of these people to relocate,” Enrico Moretti, a UC Berkeley economics professor, told Bloomberg. “It would also reduce the chances that these people bring their companies and their (employees) to California in the future.”

There isn’t much historical evidence for that, but in any event, it’s one reason that the tax is specifically written to be a one-time event. It’s also payable over five years, with 90% of the money going to fund Medicaid-related services and 10% going to K-12 public schools.

Will this all wreck California’s billionaire class? Unlikely. Supporters of the ballot initiative say the average growth in wealth of billionaires in the U.S. is 7.5%, well above the 5% one-time tax, and Forbes charted an 88% growth in billionaire wealth in just four years, 2020 to 2024, a time of pure desperation for many Californians.

That won’t stem the opposition to a plan this radical — or at least radical in terms of how California and the country have always viewed the notion of taxation.

On the other hand, there have been few situations more radical than the attack on Medicaid coming from the White House right now. The gutting of federal funding has indeed created an emergency. The ballot initiative is an emergency response, period, full stop.

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