The fiery debate about a proposed ballot measure to tax California’s billionaires has sparked some soul-searching across the state.

While the idea of a one-time tax on more than 200 people has a long way to go before getting onto the ballot and would need to be passed by voters in November, the tempest around it captures the zeitgeist of angst and anger at the core of California. Silicon Valley is minting new millionaires while millions of the state’s residents face the loss of healthcare coverage and struggle with inflation.

Supporters of the proposed billionaire tax say it is one of the few ways the state can provide healthcare for its most vulnerable. Opponents warn it would squash the innovation that has made the state rich and prompt an exodus of wealthy entrepreneurs from the state.

The controversial measure is already creating fractures among powerful Democrats who enjoy tremendous sway in California. Progressive icon Sen. Bernie Sanders (I-Vt.) quickly endorsed the billionaire tax, while Gov. Gavin Newsom denounced it .

The Golden State’s rich residents say they are tired of feeling targeted. Their success has not only created unimaginable wealth but also jobs and better lives for Californians, they say, yet they feel they are being punished.

“California politics forces together some of the richest areas of America with some of the poorest, often separated by just a freeway,” said Thad Kousser, a political science professor at UC San Diego. “The impulse to force those with extreme wealth to share their riches is only natural, but often runs into the reality of our anti-tax traditions as well as modern concerns about stifling entrepreneurship or driving job creation out of the state.”

The state budget in California is already largely dependent on income taxes paid by its highest earners. Because of that, revenues are prone to volatility, hinging on capital gains from investments, bonuses to executives and windfalls from new stock offerings, and are notoriously difficult for the state to predict.

The tax proposal would cost the state’s richest residents about $100 billion if a majority of voters support it on the November ballot.

Supporters say the revenue is needed to backfill the massive federal funding cuts to healthcare that President Trump signed this summer. The California Budget & Policy Center estimates that as many as 3.4 million Californians could lose Medi-Cal coverage, rural hospitals could shutter and other healthcare services would be slashed unless a new funding source is found.

On social media, some wealthy Californians who oppose the wealth tax faced off against Democratic politicians and labor unions.

An increasing number of companies and investors have decided it isn’t worth the hassle to be in the state and are taking their companies and their homes to other states with lower taxes and less regulation.

“I promise you this will be the final straw,” Jessie Powell, co-founder of the Bay Area-based crypto exchange platform Kraken, wrote on X. “Billionaires will take with them all of their spending, hobbies, philanthropy and jobs.”

Proponents of the proposed tax were granted permission to start gathering signatures Dec. 26 by California Secretary of State Shirley Weber.

The proposal would impose a one-time tax of up to 5% on taxpayers and trusts with assets, such as businesses, art and intellectual property, valued at more than $1 billion. There are some exclusions, including property.

They could pay the levy over five years. Ninety percent of the revenue would fund healthcare programs and the remaining 10% would be spent on food assistance and education programs.

To qualify for the November ballot, proponents of the proposal, led by the Service Employees International Union-United Healthcare Workers West, must gather the signatures of nearly 875,000 registered voters and submit them to county elections officials by June 24.

The union, which represents more than 120,000 healthcare workers, patients and healthcare consumers, has committed to spending $14 million on the measure so far and plans to start collecting signatures soon, said Suzanne Jimenez, the labor group’s chief of staff.

Without new funding, the state is facing “a collapse of our healthcare system here in California,” she said.

Rep. Ro Khanna (D-Fremont) spoke out in support of the tax.

“It’s a matter of values,” he said on X. “We believe billionaires can pay a modest wealth tax so working-class Californians have the Medicaid.”

The Trump administration did not respond to requests for comment.

The debate has become a lightning rod for national thought leaders looking to target California’s policies or the ultra-rich.

On Tuesday, Sanders endorsed the billionaire tax proposal and said he plans to call for a nationwide version.

“This is a model that should be emulated throughout the country, which is why I will soon be introducing a national wealth tax on billionaires,” Sanders said on X. “We can and should respect innovation, entrepreneurship and risk-taking, but we cannot respect the extraordinary level of greed, arrogance and irresponsibility that is currently being displayed by much of the billionaire class.”

But there isn’t unanimous support for the proposal among Democrats.

Notably, Newsom has consistently opposed state-based wealth taxes. He reiterated his opposition when asked about the proposed billionaires’ tax in early December.

“You can’t isolate yourself from the 49 others,” Newsom said at the New York Times DealBook Summit. “We’re in a competitive environment. People have this simple luxury, particularly people of that status, they already have two or three homes outside the state. It’s a simple issue. You’ve got to be pragmatic about it.”

Newsom has opposed state-based wealth taxes throughout his tenure.

In 2022, he opposed a ballot measure that would have subsidized the electric vehicle market by raising taxes on Californians who earn more than $2 million annually. The measure failed at the ballot box, with strategists on both sides of the issue saying Newsom’s vocal opposition to the effort was a critical factor.

The following year, he opposed legislation by a fellow Democrat to tax assets exceeding $50 million at 1% annually and taxpayers with a net worth greater than $1 billion at 1.5% annually. The bill was shelved before the legislature could vote on it.

The latest effort is also being opposed by a political action committee called “Stop the Squeeze,” which was seeded by a $100,000 donation from venture capitalist and longtime Newsom ally Ron Conway. Conservative taxpayer rights groups such as the Howard Jarvis Taxpayers Assn. and state Republicans are expected to campaign against the proposal.

The chances of the ballot measure passing in November are uncertain, given the potential for enormous spending on the campaign — unlike statewide and other candidate races, there is no limit on the amount of money donors can contribute to support or oppose a ballot measure.

“The backers of this proposed initiative to tax California billionaires would have their work cut out for them,” said Kousser at UC San Diego. “Despite the state’s national reputation as ‘Scandinavia by the Sea,’ there remains a strong anti-tax impulse among voters who often reject tax increases and are loath to kill the state’s golden goose of tech entrepreneurship.”

Additionally, as Newsom eyes a presidential bid in 2028, political experts question how the governor will position himself — opposing raising taxes but also not wanting to be viewed as responsible for large-scale healthcare cuts that would harm the most vulnerable Californians.

“It wouldn’t be surprising if they qualify the initiative. There’s enough money and enough pent-up anger on the left to get this on the ballot,” said Dan Schnur, a political communications professor who teaches at USC, Pepperdine and UC Berkeley.

“What happens once it qualifies is anybody’s guess,” he said.

Lorena Gonzalez, president of the California Federation of Labor Unions, called Newsom’s position “an Achilles heel” that could irk primary voters in places like the Midwest who are focused on economic inequality, inflation, affordability and the growing wealth gap.

“I think it’s going to be really hard for him to take a position that we shouldn’t tax the billionaires,” said Gonzalez, whose labor umbrella group will consider whether to endorse the proposed tax next year.

Peter Thiel speaks at the Cambridge Union in 2024.

(Nordin Catic / Getty Images for the Cambridge Union)

California billionaires who are residents of the state as of Jan. 1 would be impacted by the ballot measure if it passes . Prominent business leaders announced moves that appeared to be a strategy to avoid the levy at the end of 2025. On Dec. 31, PayPal co-founder Peter Thiel announced that his firm had opened a new office in Miami, the same day venture capitalist David Sacks said he was opening an office in Austin.

Wealth taxes are not unprecedented in the U.S. and versions exist in Switzerland and Spain, said Brian Galle, a taxation expert and law professor at UC Berkeley.

In California, the tax offers an efficient and practical way to pay for healthcare services without disrupting the economy, he said.

“A 1% annual tax on billionaires for five years would have essentially no meaningful impact on their economic behavior,” Galle said. “We’re funding a way of avoiding a real economic disaster with something that has very tiny impact.”

Palo Alto-based venture capitalist Chamath Palihapitiya disagrees. Billionaires whose wealth is often locked in company stakes and not liquid could go bankrupt, Palihapitiya wrote on X.

The tax, he posted, “will kill entrepreneurship in California.”