California's billionaire tax faces a precarious road from rich opposition

Tech billionaires have raised more than $300m to oppose the billionaire tax proposal.

San Francisco, United States - University of California at Berkeley economics professor Brian Galle recently found a flyer in his mailbox about the proposed billionaire tax he helped write. But as he read it, Galle found things he hadn't written, including that the tax can be on anyone and even on their retirement savings.

Californians have been getting such flyers and watching similar ads as they prepare to vote in the November 3 election on whether to impose the one-time tax of 5 percent on the assets of the state's billionaires.

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Spending by the billionaires to oppose the tax has made this the most expensive ballot measure ever and among the most expensive campaigns of this midterm, says David McCuan, professor of political science at Sonoma State University, who tracks state and local elections.

California's celebrated tech billionaires, including Google co-founder Sergey Brin, Doordash founder Tony Xu, Stripe co-founder Patrick Collison, Ripple co-executive chairman Chris Larsen and venture capitalists John Doerr, Michael Moritz and Vinod Khosla, are among those who have donated more than $300m to block the additional tax on their assets.

While Meta founder Mark Zuckerberg has not donated money to oppose the tax, Meta's SEC filings revealed that he told the company's board, which includes Xu and Collison, that he would buy a home outside California to avoid paying the tax. This could have affected Meta stock prices and the board created a new class of shares that Zuckerberg could use to pay the tax.

The billionaire fundraising has far outstripped that of the supporters, who only raised $32m. This has led to the ubiquitous ad campaign as well as outreach to voters.

"I feel like I am in an Alice in Wonderland alternate reality," said Ashley Craig, a volunteer for Patriotic Millionaires, a group that supports the tax.

Craig has spent months door knocking and making calls to voters to campaign for the tax and often hears misinformation about it.

"They often tell me it has secret provisions allowing everyone to be taxed, which is not entirely true," she said.

Any change in the tax would require a two-thirds majority in the assembly and would need to stay true to the spirit of the tax. But the prevalence of the ads has meant that voters often tell Craig the tax would soon include her - and them.

Making democracy more equal

"The irony is that Prop 40 [the billionaire tax proposal] is meant to make democracy more equal, but the billionaires are using their money to avoid that," says Galle, the proposal's coauthor.

The US Supreme Court's judgement in the Citizens United v FEC case gave companies and special groups the freedom to spend freely in elections, he said.

"This has led to this situation where Sergey Brin has a lot more of a political voice," says Francesco Trebbi, the BT Rocca professor of Business and Public Policy at the University of California at Berkeley's Haas School of Business. "It's Sergey Brin v millions of Californians. This leads people to lose trust in the system " .

Apart from the ad buys, Craig says she has also felt alone in the campaign arena. While the state Democratic party has endorsed the tax proposal, Craig says she hasn't had ground support from the party. "We don't have resources like social media, door knocking, phone banking and I would place the blame at the feet of the Democratic party."

Sonoma State's McCuan attributes this to the Democratic party's internal rift between the progressives and moderates, with the former in favour of such a policy and the latter resisting it.

"This is a broader proxy test between the party's progressives and moderates. If this works, progressive candidates could try such ideas in the 2028 presidential elections," McCuan says, which the billionaires and moderates want to avert.

So while the party has endorsed the measure, California Governor Gavin Newsom has opposed it, as has Xavier Becerra, the Democratic candidate for governor in the election and Katie Porter, a former congresswoman who also ran for governor.

Newsom, who is eyeing a 2028 presidential run, has opposed the tax, saying it is "poorly written. It would harm the state if its billionaires, who have an estimated wealth of 2.3 trillion according to the measure's authors, move, as Zuckerberg has planned," Newsom has said.

The tax's opponents have also backed a ballot measure that prohibits any new state taxes based on personal property or imposed retroactively. Another asks state auditors to review any proposed tax measures for their financial impact before they are voted on. If these pass and get more votes than the billionaire tax, they could negate the billionaire tax, even if it is passed.

Only a third of citizen initiatives pass

The strong campaign opposing the billionaire tax may have impacted support for it. Voters support the tax by a small margin, but also the two measures that oppose it, according to a recent poll by the Public Policy Institute of California (PPIC).

"Only about a third of such citizen initiatives pass. So the burden is on the yes side," says Mark Baldassare, statewide survey director and Miller chair in public policy at PPIC. "Support can decline if people don't feel completely sure."

But Suzane Jiminez, chief of staff at the SEIU health workers union, which has sponsored the billionaire tax measure, said, "We are feeling confident that we will have the votes. When voters see that billionaires are funding the ads, they see through them."

Senator Bernie Sanders of Vermont and Congressman Ro Khanna of California rallied across the state to drum up support for the measure. Jiminez said that in the last few weeks, 3,000 volunteers have spread out to knock on doors and distributed flyers explaining the tax across the state. "The democratic figureheads do not represent the rank and file on this. They are supporting us," Jiminez said.

It is unclear whether this will be enough, as the shortfall in funding means support for the measure remains precarious. Baldassare said he plans to do his poll again as voters read and receive the state's voter guides explaining the ballot measures and make up their minds.

Sonoma University's McCuan said that just the historic amount of money being spent on defeating the measure is a win in itself for the tax backers.

"Progressives can win by losing. They can say moderates sank us, use it as a morality play. They will attack big tech - as a bad bogeyman of US politics."