Newsom backs billionaire-funded measure to kill California's wealth tax — and ban future ones

California Gov. Gavin Newsom didn't just come out against the state's proposed billionaire tax — he endorsed a rival measure that, if it outpolls the wealth tax in November, would wipe it off the books and permanently ban any future state tax on personal property, including stocks, pensions, and 401(k) accounts.

On Friday, Newsom announced his support for Proposition 42, a ballot measure funded and placed on the ballot by Google co-founder and billionaire Sergey Brin — who is spending more than $100 million to defeat the wealth tax. The move puts Newsom squarely against his own state Democratic Party and some of California's most powerful labor unions, while aligning him with wealthy tech donors with whom he has maintained longstanding relationships dating back to his time as mayor of San Francisco, according to CalMatters.

We all agree that Californians deserve to have their retirement and life savings protected from new state taxes so those savings are there when they need them.— Gov. Gavin Newsom

The measure Newsom is trying to stop, Proposition 40 — the Billionaire Tax Act — would impose a one-time 5% tax on the net worth of California's roughly 200 billionaires, with 90% of the estimated $100 billion in five-year revenue earmarked for healthcare. The initiative was driven to the ballot by SEIU-United Healthcare Workers West, whose leader Dave Regan says the tax is a direct response to federal Medicaid cuts in President Trump's budget legislation.

What we're trying to do is restore $100 billion worth of health care cuts. Three-and-a-half million people lose health insurance. Hospitals, clinics, and emergency rooms will close.— Dave Regan, SEIU United Healthcare Workers West leader

Prop. 42 would do two things: block the retroactive application of Prop. 40's tax — which would apply to any billionaire living in California on Jan. 1, 2026 — and go further by constitutionally prohibiting any new state taxes on personal property. That sweeping ban would cover not just billionaires' stock portfolios but also pensions and 401(k) accounts before retirees begin drawing income from them, art collections, business holdings, and other financial assets, according to CalMatters.

Proponents of Prop. 42 argue the measure is needed to protect middle-class workers' retirement savings from future asset taxes. Critics note there is no current proposal to tax those accounts, and that any tax would require a two-thirds legislative supermajority to pass. The proposed billionaire tax also exempts many kinds of retirement accounts, according to CalMatters.

By voting yes on Prop 42, he's showing California his true colors. He'd rather millions of children and families lose their healthcare than ask a couple hundred billionaires to finally pay their fair share.— Debru Carthan, Vice President, SEIU-United Healthcare Workers West

Newsom is not alone among prominent Democrats opposing the wealth tax. Former Rep. Katie Porter has also come out against Prop. 40, arguing that taxing billionaires' net worth — rather than their income — risks driving them and their tax base out of the state permanently.

You don't get a second bite at tax policy. A tax that you pass has enduring consequences. When somebody leaves California, we can no longer tax them. That is a permanent problem. It is much harder to get tax base back than it is to grow it in the first place.— Katie Porter, former Democratic Congresswoman

That concern has some real-world grounding: since Prop. 40 was proposed, several billionaires have left California, including venture capitalist Peter Thiel and Google co-founders Larry Page and Sergey Brin, according to CBS News.

The wealth tax debate touches a structural feature of how the very rich accumulate money. Most billionaire wealth sits in stocks and other assets that are not taxed until sold, meaning the richest Americans can live off investments and inheritances without generating a conventional tax bill. Ray Madoff, a professor at Boston College Law, described it to CBS News as 'a system in which essentially the richest Americans have been written out of the tax system, much like the aristocracy of pre-revolutionary France.' Madoff said she sees Prop. 40 as having symbolic value and as a potential catalyst for federal action, but acknowledged it is 'just patching a temporary hole' on its own.

One billionaire who agreed to speak publicly about the measure was Nvidia founder and CEO Jensen Huang, whose net worth Forbes lists at about $200 billion, making him the seventh richest person in the world. Huang said he is not afraid of paying taxes — and that paying roughly $8 billion over five years under Prop. 40 would be 'a privilege.'

The fact that I can afford to pay $8 billion in taxes over five years is a privilege. I'm not afraid of paying taxes. I'm just afraid of being poor.— Jensen Huang, founder and CEO, Nvidia

The ballot is structured so that if either Prop. 41 or Prop. 42 receives more votes than Prop. 40, the wealth tax is nullified. Polls are tightening ahead of the November vote, with voters now more divided than earlier in the campaign, according to CBS News.

There's never been a proposal like this anywhere in the world, so it's a novel idea. We are facing an emergency.— Dave Regan, SEIU United Healthcare Workers West leader

Regan is already thinking past California. 'Other states around the country are going to start looking to follow California's lead,' he told CBS News. 'California is America's coming attraction, and this is coming to a state near you after we pass it on November 3.'

Why it matters — How California votes on these measures could determine whether wealth taxes become a viable tool for states trying to replace federal safety-net funding — and whether Newsom's alignment with billionaire donors shapes his national political standing.

Sources differ on Whether Prop. 42's personal-property tax ban would threaten middle-class retirement accounts: Yes — the ban covers pensions and 401(k)s before withdrawal, creating a broad constitutional prohibition (calmatters.org) vs Proponents argue it protects retirement savings; critics note there is no current proposal to tax those accounts and the billionaire tax already exempts many retirement accounts (calmatters.org)

Reported by thehill.com, cbsnews.com, calmatters.org, nytimes.com