According to CalMatters Housing, Governor Gavin Newsom has announced his support for Proposition 42, a ballot measure that would eliminate the proposed billionaire tax and prevent California from ever implementing wealth taxes in the future. The governor's position puts him at odds with his own Democratic Party and some labor unions who back the billionaire tax proposal.
Here's what Prop. 42 would actually do. If it passes, it would cancel out Proposition 40, which is the proposed billionaire tax that would impose a one-time tax on the assets of billionaires living in California. But Prop. 42 goes much further than just blocking that single tax. It would also ban any future taxes on personal property, which encompasses retirement accounts, investment portfolios, business holdings, art collections, and essentially all other forms of wealth that could be subject to a wealth tax down the road.
The measure was put on the ballot by Sergey Brin, the Google co-founder, and is also backed by police and fire unions. Supporters argue that middle-class workers need protection for their retirement savings and pension accounts from being taxed as assets. The governor released a statement emphasizing that Californians deserve to have their life savings protected from new state taxes.
Not everyone is pleased with Newsom's decision. According to CalMatters, labor unions and progressive advocates have criticized his endorsement, arguing that he's prioritizing relationships with wealthy tech donors over supporting a tax on billionaires. They point out that Newsom has maintained a long personal relationship with Brin, even attending each other's weddings over the years.
The governor's position is particularly noteworthy because he's previously opposed asset taxes out of concern that wealthy residents might leave California, and he's also attempted to take a populist stance against tech billionaires. Earlier this summer, according to CalMatters reporting, Newsom announced his own federal proposal for a national tax on the wealthy and other measures targeting high earners. Yet his endorsement of Prop. 42 undercuts those efforts and his party's backing of the billionaire tax measure.
What I am seeing locally here in the Bay Area is that these debates at the state level are creating real uncertainty for high-net-worth individuals considering their California ties. Whether we're talking about tech founders or established wealth holders, these kinds of tax discussions are definitely part of conversations I'm having with clients about their long-term plans and where they want to invest their resources.
