Billionaire Tax Fight Puts California's Socialist Movement at Odds With Newsom

A proposed tax on California's wealthiest residents has exposed a divide between Democratic Socialists of America supporters and Gov. Gavin Newsom, with critics warning the plan could drive wealthy individuals and businesses out of the state.

According to Fox News, the DSA backed Proposition 40 ahead of the November midterms, a measure that would have imposed a one-time 5% tax on the assets of billionaires who were California residents as of Jan. 1, 2026.

State election results showed the proposal trailing toward defeat Wednesday afternoon.

The tax would have applied to holdings including businesses, stocks and other securities, artwork, collectibles and intellectual property. Certain pensions, real estate and retirement accounts would have been excluded.

The DSA promoted the measure as a way to help fund healthcare, education and food assistance. Its materials argued that California could use the revenue to address a projected $100 billion gap in federal funding for Medi-Cal, the state's healthcare program for low-income residents, seniors and people with disabilities.

Under the proposal, 90% of the revenue would have gone toward healthcare, with the remaining 10% designated for education, food assistance and tax administration.

The group's California chapter described the plan as a temporary wealth tax affecting roughly 250 of the state's richest residents, who collectively hold an estimated $2 trillion in wealth.

"We have the money in California to pay for the quality schools and healthcare that we need. It just needs to be transferred from the wrong pockets to the right ones," the DSA's presentation stated.

Economist Richard Stern of Advancing American Freedom argued that the proposal misunderstands how billionaires hold their wealth, much of which is tied up in businesses and physical assets rather than cash.

Newsom also opposed Proposition 40, warning that a state-level tax could weaken California's competitiveness and encourage people to leave. He cited opposition from firefighters, teachers, Planned Parenthood and labor groups.

The governor instead supported Proposition 42, a countermeasure intended to restrict certain new taxes on personal property and retroactive taxation. That measure appeared on track to pass.

Newsom said he might view a similar tax differently if implemented nationally, rather than state by state.

Stern countered that a federal wealth tax could create its own incentives for wealthy Americans to relocate abroad. He also argued that transferring control of business assets to government through taxation reflects a broader socialist approach.

The debate has placed the DSA's economic priorities in direct conflict with Newsom's concerns about California's ability to retain wealthy residents and businesses.