Billionaire Tax Gets a Haircut, but California's Governor Still Says No

The Service Employees International Union Healthcare Workers West just got a dose of political reality: even when you win, you might lose.

The labor union qualified for the November ballot with its controversial billionaire tax proposal, a major organizing victory. But within 24 hours, facing relentless pushback and a June 25 deadline to finalize ballot language, the union made a stunning pivot. They publicly offered to cut their original 5% wealth tax in half—down to 2%—if Gov. Gavin Newsom would support it. The catch? He’d have to help shepherd it through the Legislature instead.

Newsom’s response was essentially: thanks, but no thanks. His spokesperson, Tara Gallegos, dismissed the compromise as cosmetic, saying the scaled-back version still suffers from“fundamental flaws that harm working Californians”and would“defund teachers, schools, clinics, and public safety.”The governor has a history on this—he opposed a similar wealthy-person tax measure in 2022, which voters rejected anyway.

Here’s what’s really at stake. The proposal aims to generate $100 billion in revenue, primarily to offset federal healthcare cuts for low-income residents, with additional funding for food assistance and education. But critics—and they’re a powerful bunch—argue that pushing billionaires out of California would backfire spectacularly. The state’s top 1% of earners generate nearly half of all personal income tax revenue. The nonpartisan Legislative Analyst’s Office estimates the 5% tax would rake in tens of billions initially, but income tax revenues could drop by hundreds of millions annually as wealthy residents relocate. That’s not theoretical damage; that’s structural.

The opposition has been wall-to-wall. Google co-founder Sergey Brin has pumped $82 million into a political committee called Building a Better California, which has raised more than $118 million total from fewer than a dozen mega-donors. The California Medical Association and California School Boards Association launched a new committee this week urging voters to reject the measure if it lands on ballots in November. Meanwhile, the Legislature and Newsom have agreed on alternative revenue approaches—extending a tax on healthcare providers, among other measures—that accomplish some of the same fiscal goals without the wealth-tax gamble.

For Sacramento insiders, this is a telling moment. A major labor union with genuine organizing muscle managed to collect nearly 875,000 signatures and qualify for the ballot. Yet they couldn’t overcome the gravitational pull of tech money, establishment Democratic skepticism, and the simple political math that losing even a slice of California’s wealthiest residents carries real consequences. The union’s quick pivot to 2% suggests they know the game might be slipping away. The question now isn’t whether the compromise saves the proposal—it’s whether anything can at this point.