Connect with us

Business

Billionaire tax proposal sparks soul-searching for Californians

Published

on

Billionaire tax proposal sparks soul-searching for Californians

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.

Advertisement

“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.

Advertisement

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.

Advertisement

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.

U.S. Rep. Ro Khanna (D-Fremont) speaks during a news conference at the U.S. Capitol on Nov. 18.

(Celal Gunes / Anadolu via Getty Images)

Advertisement

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.

Advertisement

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.”

Advertisement

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.

Advertisement

“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.

Advertisement

“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.

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.

Advertisement

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.”

Advertisement

Business

In-N-Out Burger outlets in Southern California hit by counterfeit bill scam

Published

on

In-N-Out Burger outlets in Southern California hit by counterfeit bill scam

Two people allegedly used $100 counterfeit bills at dozens of In-N-Out Burger restaurants in Southern California in a wide-reaching scam.

Glendale Police officials said in a statement Friday that 26-year-old Tatiyanna Foster of Long Beach was taken into custody last month. Another suspect, 24-year-old Auriona Lewis, also of Long Beach, was arrested in October.

Police released images of $100 bills used to purchase a $2.53 order of fries and a $5.93 order of a Flying Dutchman.

The Los Angeles County District Attorney’s Office charged Lewis with felony counterfeiting and grand theft in November.

Advertisement

Elizabeth Megan Lashley-Haynes, Lewis’s public defender, didn’t immediately respond to a request for comment.

Glendale police said that Lewis was arrested in Palmdale in an operation involving the U.S. Marshals Task Force. Foster is expected in court later this month, officials said.

”Lewis was found to be in possession of counterfeit bills matching those used in the Glendale incident, along with numerous gift cards and transaction receipts believed to be connected to similar fraudulent activity,” according to a police statement.

A representative for In-N-Out Burger told KTLA-TV that restaurants in Riverside, San Bernardino and San Diego counties were also targeted by the alleged scam.

“Their dedication and expertise resulted in the identification and apprehension of the suspects, helping to protect our business and our communities,” In-N-Out’s Chief Operations Officer Denny Warnick said. “We greatly value the support of law enforcement and appreciate the vital role they play in making our communities stronger and safer places to live.”

Advertisement

The company, opened in 1948 in Baldwin Park, has restaurants in nine states.

An Oakland location closed in 2024, with the owner blaming crime and slow police response times.

Company chief executive Lynsi Snyder announced last year that she planned to relocate her family to Tennessee, although the burger chain’s headquarters will remain in California.

Advertisement
Continue Reading

Business

Newsom’s budget includes $200 million to make up for Trump’s canceled EV rebates, among other climate items

Published

on

Newsom’s budget includes 0 million to make up for Trump’s canceled EV rebates, among other climate items

Gov. Gavin Newsom on Friday doubled down on California’s commitment to electric vehicles with proposed rebates intended to backfill federal tax credits canceled by the Trump administration.

The plan would allocate $200 million in one-time special funds for a new point-of-sale incentive program for light-duty zero-emissions vehicles. It was part of a sweeping $348.9-billion state budget proposal released Friday, which also included items to address air pollution and worsening wildfires, amid a projected $3-billion state deficit.

EVs have become a flashpoint in California’s battle against the Trump administration, which moved last year to repeal the state’s long-held authority to set strict tailpipe emission standards and eventually ban the sale of new gas powered cars.

Last year, Trump ended federal tax credits of up to $7,500 for EV customers that were part of President Biden’s 2022 Inflation Reduction Act. In September, his administration also let lapse federal authorization for California’s Clean Air Vehicle decal program, which allowed solo EV drivers to use carpool lanes.

Advertisement

“Despite federal interference, the governor maintains his commitment to protecting public health and achieving California’s world leading climate agenda,” Lindsay Buckley, spokesperson for the California Air Resources Board, said in an email. “This incentive program will help continue the state’s ZEV momentum, especially with the federal administration eliminating the federal EV tax credit and carpool lane access.”

Newsom had previously flip-flopped on this idea, first vowing to restore a state program that provided up to $7,500 to buy clean cars and then walking it back in September. That same month, a group of five automakers including Honda, Rivian, Hyundai, Volkswagen and Audi wrote a letter urging Newsom and state legislators to establish a $5,000 EV tax rebate to replace the lost federal incentives, Politico reported.

During his State of the State speech Thursday — one year after the devastating Palisades and Eaton fires in Los Angeles — Newsom said California “refuse[s] to be bystanders” while China and other nations take the lead on electric vehicles and the clean energy transition. He touted the state’s investments in solar, hydrogen, wind and nuclear power, as well as its recent move away from the use of any coal-fired power.

“We must continue our prudent fiscal management, funding our reserves, and continuing the investments Californians rely on, from education to public safety, all while preparing for Trump’s volatility outside our control,” the governor said in a statement. “This is what responsible governance looks like.”

Several environmental groups had been urging Newsom to invest more in clean air and clean vehicle programs, which they say are critical to the state’s ambitious goals for human health and the environment. Transportation is the largest source of climate and air pollution in California and is responsible for more than a third of global warming emissions, said Daniel Barad, Western states policy manager with the nonprofit Union of Concerned Scientists.

Advertisement

“As federal attacks threaten California’s authority to protect public health, incentives are more essential than ever to scale up clean cars and trucks,” Barad said. “The governor and legislative leaders must act now to fully fund zero-emission transportation and pursue new revenue to grow and sustain climate investments.”

Katelyn Roedner Sutter, California senior director with the nonprofit Environmental Defense Fund, called it “an essential step to save money for Californians, cut harmful pollution, spur innovation, and support the global competitiveness of our auto industry.”

While the budget proposal does not include significant new spending proposals, it contains other line items relating to climate and the environment. Among them are plans to continue implementing Proposition 4, the $10-billion climate bond approved by voters in 2024 for programs geared toward wildfire resilience, safe drinking water, flood management, extreme heat mitigation and other similar efforts.

Among $2.1 billion in climate bond investments proposed this year are $58 million for wildfire prevention and hazardous fuels reduction projects in vulnerable communities, and nearly $20 million to assist homeowners with defensible space to prevent fire. Water-related investments include $232 million for flood control projects and nearly $70 million to support repairs to existing or new water conveyance projects.

The proposal also lays out how to spend money from California’s signature cap-and-trade program, which sets limits on greenhouse gas emissions and allows large polluters to buy and sell unused emission allowances at quarterly auctions. State lawmakers last year voted to extend the program through 2045 and rename it cap-and-invest.

Advertisement

The spending plan includes a new tiered structure for cap-and-invest that first funds statutory obligations such as manufacturing tax exemptions, followed by $1 billion for the high speed rail project, $750 million to support the California Department of Forestry and Fire Protection, and finally secondary program funding such as affordable housing and low-carbon transit options.

But while some groups applauded the budget’s broad handling of climate issues, others criticized it for leaning too heavily on volatile funding sources for environmental priorities, such as special funds and one-time allocations.

The Sierra Club called the EV incentive program a crucial investment but said too many other items were left with “patchwork strategies that make long-term planning harder.”

“Just yesterday, the Governor acknowledged in his State of the State address that the climate risk is a financial risk. That is exactly why California needs climate investments that are stable and ongoing,” said Sierra Club director Miguel Miguel.

California Environmental Voters, meanwhile, stressed that the state should continue to work toward legislation that would hold oil and gas companies liable for damages caused by their emissions — a plan known as “Make Polluters Pay” that stalled last year amid fierce lobbying and industry pressure.

Advertisement

“Instead of asking families to absorb the costs, the Legislature must look seriously at holding polluters accountable for the harm they’ve caused,” said Shannon Olivieri Hovis, California Environmental Voters’ chief strategy officer.

Sarah Swig, Newsom’s senior advisor for climate, noted that the state’s budget plan came just days after Trump withdrew the United States from the United Nations Framework Convention on Climate Change, a major global treaty signed by nearly 200 countries with the aim of addressing global warming through coordinated international action.

“California is not slowing down on climate at a time when we continue to see attack after attack from the federal government, including as recently as this week with the Trump administration’s withdrawal from the UNFCCC,” Swig told reporters Friday. “California’s leadership has never mattered more.”

Advertisement
Continue Reading

Business

Abandoned shops and missing customers: Fire-scarred businesses are still stuck in the aftermath

Published

on

Abandoned shops and missing customers: Fire-scarred businesses are still stuck in the aftermath

The charred remains of the historic Pacific Palisades Business Block cast a shadow over a once-bustling shopping district along West Sunset Boulevard.

Empty lots littered with debris and ash line the street where houses and small businesses once stood. A year since the Palisades fire roared through the neighborhood, only a handful of businesses have reopened.

The Starbucks, Bank of America, and other businesses that used to operate in the century-old Business Block are gone. All that remains of the Spanish Colonial Revival building are some arches surrounding what used to be a busy retail space. The burned-out, rusty remnants of a walk-in vault squat in the center of the structure.

Nearby, the Shade Store, the Free-est clothing store, Skin Local spa, a Hastens mattress store, Sweet Laurel Bakery and the Hydration Room are among the many stores still shuttered. Local barbershop Gornik & Drucker doesn’t know if it can reopen.

“We have been going back and forth on what it would take to survive,” co-owner Leslie Gornik said. “If we open, we have to start over from scratch.”

Advertisement

Hundreds gathered around Business Block on the anniversary of he fire on Wednesday to witness a military-style white-glove ceremony to pay respects to the families who lost loved ones. Photos of those killed from the neighborhood were placed at the Palisades Village Green next door.

The Palisades fire burned for 24 days, destroying more than 6,800 structures, damaging countless others and forcing most of the neighborhood’s residents to move elsewhere. About 30 miles northeast, the Eaton fire burned more than 9,400 structures. Combined, the fires killed 31 people.

Remnants of the the Pacific Palisades Business Block, which was completed in 1924 and burned in the Palisades fire.

The few businesses that are back in Palisades serve as a beacon of hope for the community, but owners and managers say business is down and customers haven’t returned.

Advertisement

Ruby Nails & Spa, located near the Business Block, was closed for eight months before reopening in September. Now business is only half of what it was before the fires, owner Ruby Hong-Tran said.

“People come back to support but they live far away now,” she said. “All my clients, their houses burned.”

Ruby Hong-Tran, owner of Ruby Nails & Spa in Pacific Palisades, says her business is half of what it was since reopening.

Ruby Hong-Tran, owner of Ruby Nails & Spa in Pacific Palisades, says her business is half of what it was since reopening.

It took months to clean all the smoke damage from her shop. The front is still being fixed to cover up burn damage.

The firestorms destroyed swaths of other neighborhoods, including Malibu, Topanga, Sierra Madre and Altadena, where businesses and homeowners also are struggling to build back.

Advertisement

Some are figuring out whether it is worth rebuilding. Some have given up.

The Los Angeles Economic Development Corporation estimated last year that more than 1,800 small businesses were in the burn zones in Pacific Palisades, Malibu and Altadena, impacting more than 11,000 jobs.

Businesses say they often have been on their own. The Federal Emergency Management Agency tasked the U.S. Army Corps of Engineers to clean up debris at private residences, some public buildings and places of worship — but not commercial properties.

Business owners had to clean up the charred debris and toxic waste on their properties. Many had to navigate complicated insurance claims and apply for emergency loans to stay afloat.

Rosie Maravilla, general manager of Anawalt’s Palisades Hardware, said damage to her store was limited, and insurance covered the cleaning, so she was able to open quickly. The store reopened just one month after the fire.

Advertisement
Rosie Maravilla, general manager of Anawalt Palisades Hardware, in front of of the store in Pacific Palisades.

Rosie Maravilla, general manager of Anawalt Palisades Hardware, in front of of the store in Pacific Palisades.

Still, sales are 35% lower than what they used to be.

“In the early days, it was bad. We weren’t making anything,” Maravilla said. “We’re lucky the company kept us employed.”

The customer base has changed. Instead of homeowners working on personal projects, the store is serving contractors working on rebuilding in the area.

An archival image of the area in Pacific Palisades hangs over the aisles in Anawalt Palisades Hardware.

An archival image of the area in Pacific Palisades hangs over the aisles in Anawalt Palisades Hardware, where business is down despite a customer base of contractors who are rebuilding.

Advertisement

Across the street from the Business Block, the Palisades Village mall was spared the flames and looks pristine, but is still closed. Shop windows are covered with tarps. Low metal gates block entry to the high-end outlets. The mall is still replacing its drywall to eliminate airborne contaminants that the fire could have spread.

All of its posh shops still are shut: Erewhon, Lululemon ,Bay Theater, Blue Ribbon Sushi, athletic apparel store Alo, Buck Mason men’s and Veronica Beard women’s boutiques.

Mall owner and developer Rick Caruso said he is spending $60 million to reopen in August.

The need to bring back businesses impacted by the fires is urgent, Caruso said, and not just to support returning residents.

“It’s critical to bring jobs back and also for the city to start creating some tax revenue to support city services,” he said. ”Leaders need to do more to speed up the rebuilding process, such as speeding up the approval of building permits and stationing building inspectors closer to burn areas.”

Advertisement
Pedestrians walk past the Erewhon market in Palisades Village that plans to reopen this year.

Pedestrians walk past the Erewhon market in Palisades Village that plans to reopen this year.

(Genaro Molina/Los Angeles Times)

Wednesday, on the anniversary of the fire, Caruso sent three light beams into the sky over the mall, which met in one stream to honor the impacted communities of Pacific Palisades, Altadena and Malibu.

The nighttime display will continue through Jan. 31.

Business Block’s history dates to 1924, when it served as a home for the community’s first ventures. In the 1980s, plans to tear it down and build a mall sparked a local uprising to save the historic symbol of the neighborhood’s vibrancy. It was designated a Los Angeles Historic-Cultural Monument in 1984.

Advertisement

Tiana Noble, a Starbucks spokesperson, said the landlord terminated the company’s lease when the building burned down. Bank of America said it secured a new lease to rebuild nearby.

Business Block’s fate is still unclear. Some people want to preserve its shell and turn it into a memorial.

This week, it was ringed by a fence emblazoned with the words “Empowering fresh starts together.”

Caruso said the ruins should be torn down.

“It needs to be demolished and cleaned up,” he said. “It’s an eyesore right now and a hazard. I would put grass on it and make it attractive to the community.”

Advertisement
Twisted and scorched remnants of the the Pacific Palisades Business Block still are there a year after the fire.

Twisted and scorched remnants of the the Pacific Palisades Business Block still are there a year after the fire.

A short walk from the Business Block and near a burned-down Ralphs grocery store is the Palisades Garden Cafe, one of the few places in the neighborhood to get food and drink. The small, vibrant cafe was closed for two months after the fire, during which the employees went without pay.

Manager Lita Rodriguez said business is improving, but misses the regulars.

“We used to get tons of students and teachers who live and work here,” she said. “Our customers are mostly contractors now.”

Advertisement
Continue Reading
Advertisement

Trending