Silicon Valley Tensions Rise as Unions Push Billionaire Tax for Healthcare

Would California's billionaires actually depart due to a one-time tax? This is now the central issue sparking debate within the state...

Would California's billionaires actually depart due to a one-time tax? This is now the central issue sparking debate within the state's political and business circles, as labor unions unveil a proposal to impose a 5 percent emergency tax on the wealth of approximately 200 of the state's wealthiest individuals. The organizers claim that this initiative could generate around $100 billion to offset extensive healthcare reductions set to take effect in federal healthcare by 2026.

The Service Employees International Union, which represents United Healthcare Workers, is spearheading the campaign and presenting it as a crucial lifeline for the healthcare system, which they claim will "collapse" because of annual Medicaid cuts amounting to 20 to 30 billion dollars over the next five years. "We are urging California's roughly 200 billionaires to contribute," stated a union spokesperson, Renee Saldana. The funds would help keep emergency rooms operational, preserve millions of jobs, and provide coverage for millions of individuals.

It has received backing from prominent figures like Senator Bernie Sanders, who called the effort a blueprint to be followed across the country, and Representative Ro Khanna, whose Silicon Valley district includes many of the intended billionaires. Sanders highlighted the significant stakes: “We can't keep accepting an unfair economy where 60% of our population lives from paycheck to paycheck… while the top 1% holds more wealth than the bottom 93%.”

However, Governor Gavin Newsom has voiced his opposition. During the New York Times DealBook conference, he warned about California's isolation compared to other states and emphasized the need for practical approaches. His political advisors argue that the proposal is a poor political move that could jeopardize the state's general fund, which heavily relies on high-income individuals.

It would take effect from January 1, 2026, and would be calculated based on net worth as of 2025, to be paid out over five years, or 1 percent annually. Economists note that this structure discourages relocation, as moving after the reference date would not help avoid the tax. Emmanuel Saez from UC Berkeley estimates that the policy could still generate around $100 billion even with a 10 percent rate of avoidance.

Individuals within the tech sector who are against the proposal have not remained quiet. Peter Thiel, a venture capitalist, and Larry Page, co-founder of Google, are reportedly exploring leaving the state. Palmer Luckey, co-founder of defense technology firm Anduril, stated that the tax could lead founders to sell large portions of their companies, while Garry Tan, CEO of Y Combinator, predicted a rush of startups to other states. The debate centers on taxing illiquid assets such as shares in private companies that are difficult to convert into cash. Dylan Field, CEO of Figma, cautioned that founders could face a doubling of tax obligations if they have capital gains liabilities.

However, historical evidence suggests that billionaire flight is uncommon. A study conducted by Cristobal Young and Charles Varner, using tax data from California and New Jersey, found nearly no long-term migration responses to tax increases. Trends in international business, as examined by Henrik Kleven and Emmanuel Saez, are not new: individuals connected to businesses, real estate, and social networks tend to stay in place, and asset reclassification for tax evasion is more common than relocating. According to one analysis of wealth tax migration, it was noted, “paper moves more than people.”

It's more than just about the wealth of billionaires. California's healthcare system is facing significant strain because of federal budget reductions included in President Trump's "One Big Beautiful Bill," with an estimated 3.4 million individuals potentially losing Medicaid coverage. Union leaders argue that without immediate financial support, hospitals, clinics, and nursing homes could close, affecting communities and increasing expenses in other areas of the system, while also harming public health.

The political landscape is complex. Newsom's allies see his position as consistent with a history of maintaining strong stances on taxes, which could bolster his potential future presidential campaign. Moderate lawmakers argue that aligning with billionaires might lead working-class voters to oppose them and weaken California's ability to mitigate the impact of federal policies. Meanwhile, advocates for the measure are working quickly to gather the 874,641 signatures needed to place the issue on the November 2026 ballot, believing public support will be strong as most polls indicate widespread backing for a tax on the wealthy.

The proposal consists of a set of financial and symbolic focal points for California's technology elite. For unions and their allies, it represents an unusual chance to channel immense wealth toward the pressing needs of the population. Among those who follow policy, it raises the question of whether a state can implement a wealth tax that generates substantial revenue without triggering the economic downturn that critics are worried about.