What Is the California Billionaire Tax Act? Is It Actually Happening?

A major labor union is working to put a new wealth tax proposal in front of Californians in November. But the proposal would only actually impact a small few — billionaires.

The California Billionaire Tax Act is a one-time tax that, if realized, would unlock revenue from the wealthiest in the state to support a health care system that some elected officials and leaders have warned faces major strain due to federal funding cuts.

The statewide proposal, led by Service Employees International Union-United Healthcare Workers West, has been in the works for some time. Attorney General Rob Bonta issued the official title and summary for the tax act at the end of December, paving the way for proponents to collect the tens of thousands of signatures they’ll need to get this proposal on the ballot in November.

Vermont Sen. Bernie Sanders joined the proposal’s campaign kickoff in Los Angeles on Wednesday, Feb. 18, tossing out numerous figures that illustrated wealth disparities in the United States and likening billionaires having to pay a few billion dollars more in taxes as “pocket change.”

His clear support comes as Gov. Gavin Newsom has opposed it and as the proposal has generated fears it’d force California’s wealthiest residents to flee. Rep. Kevin Kiley of California’s 3rd Congressional District is set to introduce a bill fighting the tax proposal, saying it’s making California’s “leading job creators” leave preemptively.

Meanwhile, Los Angeles County leaders have turned to a proposed temporary sales tax increase to offset health care funding cuts. In June, county voters will decide whether to back it.

Here’s what to know about the California Billionaire Tax Act.

Who is taxed under the California Billionaire Tax Act?

Californians with a net worth of $1 billion or more and certain trusts would see a one-time 5% tax, according to a filing for the proposal. Proponents said this tax will apply to about 200 people in California.

How is health care changing for Californians under Trump?

President Donald Trump’s “One Big Beautiful Bill Act” implements changes in eligibility for both Medi-Cal, the state’s Medicaid program, and CalFresh, the state’s Supplemental Nutrition Assistance Program.

The changing work requirements, paired with “administrative burden,” could leave one to two million people without Medi-Cal, according to the nonpartisan Legislative Analyst’s Office. By 2028, up to three million people could lose Medi-Cal, both due to OBBA and changes made in California’s budget, Miranda Dietz, director of the Health Care Program at UC Berkley Labor Center, told California lawmakers in February.

Dietz, citing a previous look at the impact of OBBA, said that a projected $20 billion decrease in federal funding would mean 200,000 fewer jobs in the state, nearly two-thirds of which are “directly” in health care.

Also at risk: Hospitals will face lower margins due to fewer Medi-Cal enrollees and more uninsured patients, according to Jason Constantouros of the LAO, citing recent studies. Public hospital systems face $3.4 billion a year in federal funding cuts, the California State Association of Counties said in a report estimating the costs of OBBA.

What does this wealth tax in California do?

The revenue would be used to respond to “urgent, existing health care, education, and nutrition needs,” according to a filing for the initiative. Ninety percent of the revenue this tax generates would go to the Billionaire Tax Health Account, while 10% would go to the Billionaire Tax Education and Food Assistance Account.

Where would the money from the California Billionaire Tax Act go?

It’s supposed to create revenue to fund health care, education, and food assistance through a one-time tax.

Among what the money that goes into the Billionaire Tax Health Account could be used for, according to a filing, include:

Spending to restore or address funding cuts or reductions
Investments to protect or enhance Medi-Cal
Prevention or mitigation of facility closures
Other investments to support health care access, coverage and more

The money that goes into the Billionaire Tax Education and Food Assistance Account could be used for:

Spending related to education and food assistance to restore or address funding cuts or reductions
To make investments in the public education system or further investments in CalFresh, CalFAP, CalFood, or California’s Universal Meals Program

When would this wealth tax occur?

The tax would be due in 2027, although taxpayers could opt to spread the payments out over five years at a higher cost, according to the LAO.

The LAO said the wealth tax would “probably” collect tens of billions of dollars, but it’s hard to determine the exact figure. One reason is that it’s “hard to know what actions billionaires would take to reduce the amount of tax they pay.”

Paris Barraza is a reporter covering Los Angeles and Southern California for the USA TODAY Network. Reach her at [email protected].

This article originally appeared on USA TODAY: What is the California Billionaire Tax Act? Is it actually happening?

Reporting by Paris Barraza, USA TODAY / USA TODAY

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