What is California’s Millionaire Tax Law? Is It Really Happening?
A major labor union is working to put a new wealth tax proposal before Californians in November. But this proposal will affect only a few – billionaires.
The California Billionaire Tax Act is a one-time tax that, if enacted, would unlock money from the state’s wealthiest to support a health care system that some elected officials and leaders have warned will face a severe blow to federal funding cuts.
The statewide proposal, led by the Service Employees International Union-United Healthcare Workers West, has been in the works for some time. Attorney General Rob Bonta released the official title and summary of the tax legislation in late December, clearing the way for supporters to gather the tens of thousands of signatures they will need to get the proposal on the ballot in November.
Vermont Sen. Bernie Sanders joined the campaign trail in Los Angeles on Wednesday, Feb. 18, releasing a number of statistics showing wealth disparity in the United States and likening billionaires who have to pay a few billion dollars more in taxes as “pocket change.”
His clear support comes as Gov. Gavin Newsom opposes it again as the proposal has raised fears that it will force California’s wealthiest residents to flee. Representative Kevin Kiley of California’s 3rd Congressional District will introduce a bill to counter the tax proposal, saying it causes California’s “best job creators” to leave prematurely.
Meanwhile, Los Angeles County leaders have turned to a proposed short-term sales tax increase to offset health care funding cuts. In June, state voters will decide if they support it.
Here’s what you need to know about the California Billionaire Tax Act.
Who is taxed under the California Billionaire Tax Act?
Californians with net worth of $1 billion or more and certain trusts would see a one-time tax of 5%, according to the filing of the proposal. Supporters said the tax would 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 eligibility changes for both Medi-Cal, the state’s Medicaid program, and CalFresh, the state’s Nutrition Assistance Program.
Changing job requirements, coupled with “administrative burden,” could leave 1 to 2 million people without Medi-Cal, according to the nonpartisan Legislative Analyst’s Office. By 2028, up to three million people could lose Medi-Cal, due to OBBA and changes made to the California budget, Miranda Dietz, director of the Health Care Program at the UC Berkley Labor Center, told California lawmakers in February.
Dietz, citing an earlier look at the impact of the OBBA, said the estimated $20 billion drop in federal funding would mean 200,000 fewer jobs in the state, about two-thirds of which are “direct” in health care.
Also at risk: Hospitals will face lower margins due to fewer Medi-Cal enrollees and uninsured patients, according to LAO’s Jason Constantouros, citing recent studies. Community hospital systems face $3.4 billion a year in federal funding cuts, the California State Association of Counties said in a report estimating OBBA costs.
What does this wealth tax do in California?
The proceeds will be used to address “emergency, health care, education, and nutrition needs,” according to the initiative’s filing. 90% of the revenue from this tax will go to the Billionaire Tax Health Account, and 10% will go to the Billionaire Tax Education and Food Assistance Account.
Where will the money from the California Billionaire Tax Act go?
He should create funds to fund health care, education, and food aid through a one-time tax.
Among the funds that the Billionaire Tax Health Account could be used for, according to the filing, include:
- Expenditure is to restore or deal with reductions or reductions in funds
- Investments to protect or improve Medi-Cal
- Preventing or reducing facility closures
- Other investments support health care affordability, coverage and more
Money in the Billionaire Tax Education and Food Assistance Account may be used for:
- Spending related to education and food assistance to restore or address cuts or reductions in funding
- Making an investment in a public education program or an additional investment in CalFresh, CalFAP, CalFood, or the California Universal Food Program
When was this wealth tax going to happen?
The tax will be paid in 2027, although taxpayers can choose to spread the payments over five years at a higher cost, according to the LAO.
The LAO said the wealth tax would “probably” raise tens of billions of dollars, but it is difficult to determine the exact amount. Another reason is that “it is difficult to know what steps billionaires can take to reduce the amount of tax they pay.”
Paris Barraza is a Los Angeles and Southern California reporter for the USA TODAY Network. Reach out to him [email protected].
This article first appeared in USA TODAY: What is the California Billionaire Tax Act? Is it really happening?
Reported by Paris Barraza, USA TODAY / USA TODAY
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