Business
The battle brewing over California workers' unique right to sue their bosses
California workers who believe they have been victims of wage theft or other workplace abuses have for more than two decades relied on a unique state law that lets them sue employers not only for themselves but also for other workers.
Now a battle is shaping up over the law, known as the Private Attorneys General Act, or PAGA. An initiative seeking to replace PAGA will appear on the ballot in California in November, the culmination of long-standing efforts by corporate and industry groups to undo the law.
Two reports released last week offer dueling narratives about whether PAGA helps or hurts workers — marking the opening of a potentially expensive fight over the landmark law that relatively few know about.
Labor researchers say that the ballot measure, if approved, would harm employees, particularly people with low-wage jobs, by taking away their ability to file what are essentially class-action suits against employers that allege labor law violations. The ballot measure also would weaken the state’s already strained system for enforcing workplace laws, the researchers say.
But the business coalition backing the ballot initiative, called the Fair Play and Employer Accountability Act, counters that the labor law has resulted in a proliferation of lawsuits that small businesses and nonprofits have little ability to fight. Workers end up getting less money after a long legal process than if they had filed complaints through state agencies, the initiative’s proponents say.
Worker advocates have long complained that chronic understaffing at state agencies responsible for investigating employee complaints means that allegations about wage theft and other violations can take years to be resolved. So workers turn to the courts.
Luz Perez Bautista and her mother, Maria de la Luz Bautista-Perez, were among three named plaintiffs who sued Juul Labs Inc. in federal court in 2020 for allegedly misclassifying some 450 campaign staffers working on a ballot measure the company was promoting to allow the sale of electronic cigarettes in San Francisco. The workers were all classified as independent contractors rather than employees, which saddled them with expenses that employees wouldn’t have to pay.
Juul was sued in 2020 by three workers, who alleged they were misclassified as independent contractors rather than employees, using a California law that allows employees to sue companies on behalf of other workers.
(Ted Shaffrey / Associated Press)
Workers were made to travel long distances between campaign offices without pay, were not given lunch breaks and were terminated abruptly, Perez Bautista said, speaking at a news conference last week to unveil a report by the UCLA Labor Center as well as researchers at advocacy groups PowerSwitch Action, and the Center for Popular Democracy.
Because the workers had signed arbitration agreements, without PAGA they would not have had the legal standing to take Juul and the nonprofit it created for the campaign to court. Through their PAGA claim workers secured a $1.75-million settlement.
“It is important for other workers to see that … you can hold your boss accountable,” Bautista-Perez said at the news conference.
The report argues broadly that eliminating workers’ ability to pursue private lawsuits would leave them more vulnerable to having their wages stolen by employers and other abuses of their rights.
PAGA plays a “vital role” in bringing bad actors into compliance, said Tia Koonse, legal and policy research manager at the UCLA Labor Center.
Koonse and other authors of the report said the ballot initiative is disingenuously framed as a push to reform PAGA and bolster other enforcement mechanisms.
“By cloaking policies that hurt workers in language that says they’re helping workers, corporations are making it sound like what is down is up,” said Minsu Longiaru, senior staff attorney for PowerSwitch Action.
Other mechanisms to enforce California labor laws are insufficient on their own, including wage claims and whistleblower complaints investigated by state agencies, the report argues, because the sheer number of labor violations dwarfs the state’s capacity to enforce them.
Each year, the $40 million recovered in approximately 30,000 wage claims filed with the state labor commissioner represents roughly 2% of the estimated $2 billion California workers lose to wage theft, according to the report.
An analysis of California Labor & Workforce Development Agency data by the report’s authors found that 91% of PAGA claims allege wage theft, primarily overtime violations and failure to pay for all hours worked, although some involved violations of earned sick leave rights. Other forms of wage theft include paying workers less than minimum wage, denying workers meal breaks or rest periods and requiring employees to finish tasks before or after their shifts.
The initiative at the center of discussion, the Fair Play and Employer Accountability Act, got the green light to be placed on the November 2024 ballot almost two years ago.
It proposes to remove the law’s powerful private right of action, which empowers workers to file lawsuits against their employers, suing for both back wages and civil penalties on behalf of themselves, other employees and the state of California. Official language for the measure states it would eliminate “employees’ ability to file lawsuits for monetary penalties for state labor law violations.”
Backers emphasize it also offers replacement provisions that would bolster state agency enforcement of workplace rules.
Replacement provisions include doubling penalties for employers “willfully” violating labor law, requiring 100% of monetary penalties to be awarded to harmed employees (rather than the current division of 25% to the employee and 75% to the state of California), and requiring that the state provide employers with resources to help with coming into compliance.
“Today’s PAGA system is completely broken and does not work well for employees or employers,” said Jennifer Barrera, president of the California Chamber of Commerce, in announcing a report released last week by backers of the ballot initiative, called the Fix PAGA coalition.
Barrera said that because one employee can sue on behalf of others, it allows lawyers to stack charges and extract high penalties from employers with few barriers because PAGA claims don’t require the same type of notification and certification of workers allegedly affected that a class-action suit would require.
“The statutory framework of PAGA is what creates the abuse,” she said in an interview.
Barry Jardini, executive director of the California Disability Services Assn., said that members of the trade group, many of which are nonprofits reliant on state or federal funding, are increasingly burdened by PAGA claims. He said 20 of some 85 members who responded to a recent survey said they dealt with PAGA claims in 2023.
Jardini said that disability service businesses have struggled to provide true “responsibility-free” 10-minute rest breaks in accordance with labor laws because often workers “can’t just walk away” from clients especially if they are out and about instead of at home. He said employers have looked for creative solutions, such as paying employees extra for working through breaks or tacking on breaks at the beginnings or ends of shifts rather than the middle, but these fixes aren’t legal substitutes for rest breaks workers are entitled to.
“We run into a bit of a legal rock and a hard place,” he said. “We do have a conflict with the law in terms of some of our services. Once that becomes known, it’s relatively easy for an attorney to try to solicit a client that works in this industry that is maybe ripe for PAGA claims.”
The claims sap resources and lead to program closures because “providers with very thin margins are using up their reserves on settling these claims,” Jardini said. “Other times providers are unable to give wage increases to their staff. And at the end of the day it impacts people with disabilities.”
Some disagree that there is rampant of abuse of PAGA. UCLA Labor Center researchers published a report in February 2020 finding no evidence that PAGA unleashed a flood of frivolous litigation, as its detractors complain, and that it had demonstrably enhanced Labor Code compliance among employers.
In response to criticisms outlined by the recent UCLA Labor Center report, Kathy Fairbanks, a spokesperson for the coalition, pointed to findings in the coalition’s report, which argues that PAGA is too slow to resolve claims, leaves workers with little compensation, and enriches lawyers while saddling businesses with costly suits.
Fairbanks said that workers get about one-third of the compensation and that PAGA cases take twice as long compared with cases adjudicated by state agencies. That is because “lawyers take massive fees and are getting rich while workers get very little,” Fairbanks said.
Lorena Gonzalez Fletcher, head of the powerful California Labor Federation, agreed that PAGA is at times abused by “unscrupulous attorneys,” but said repealing the law is not a solution.
“There’s massive wage theft that goes unaccounted for, and to take away this tool from the tool box would be damaging to workers and a gift for corporate America,” said Gonzalez, who formerly served as a state assembly member known for writing labor-friendly legislation.
If approved by voters, the ballot measure “would leave workers with dwindling opportunities to enforce labor law.”
Gonzalez said it is well understood that state labor agencies are subject to short staffing and ebbs and flows of political desire to take on major cases. Although it’s not ideal to have to rely on private attorneys to help enforce the law, PAGA provides an important avenue for enforcement, she said.
The initiative doesn’t mandate or otherwise clear the way for increased funding for enforcement agencies, Gonzalez said.
To suggest the business lobby, through the ballot initiative, is asking for changes that will actually improve labor law enforcement “doesn’t pass the smell test,” she said.
Backers of the ballot initiative are open to working on a legislative compromise to avert a costly battle, spokesperson Fairbanks said. But any sort of deal would have to be reached before the end of June — the deadline to pull measures off the November ballot. The Fix PAGA coalition reports having banked some $15 million in campaign contributions so far.
Business groups have sought to shrink PAGA’s reach in state and federal courts with limited success in recent years.
In June 2022, the U.S. Supreme Court, considering the California case Viking River Cruises Inc. vs. Moriana, ruled that PAGA violated the rights of employers and that the claims of other employees would have to be dismissed because the employee sent to arbitration would no longer have standing to pursue that litigation.
But in a concurring opinion, it also affirmed that interpretation of PAGA was a matter of state, not federal, law and in effect kicked the matter back to California.
State appellate courts consistently have held that PAGA claims by workers cannot be forced into arbitration because they are brought as if the individual is operating on the state’s behalf.
In July 2023, the California Supreme Court rejected an argument by Uber that sought to limit the ability of its drivers to take employment-related disputes to court, unanimously determining that a driver could not sign away the right to represent their peers in a lawsuit.
The decision didn’t end the debate, however, with other cases bouncing around the courts.
A federal appeals court, citing the Uber case, ruled Feb. 12 that a PAGA suit against Lowe’s Home Centers for allegedly underpaying workers who took sick leave could stand.
Judge William Fletcher wrote in the ruling that a state court “has the authority to correct a misinterpretation of that state’s law by a federal court,” including the U.S. Supreme Court.
Google and Character.AI, a California startup, have agreed to settle several lawsuits that allege artificial intelligence-powered chatbots harmed the mental health of teenagers.
Court documents filed this week show that the companies are finalizing settlements in lawsuits in which families accused them of not putting in enough safeguards before publicly releasing AI chatbots. Families in multiple states including Colorado, Florida, Texas and New York sued the companies.
Character.AI declined to comment on the settlements. Google didn’t immediately respond to a request for comment.
The settlements are the latest development in what has become a big issue for major tech companies as they release AI-powered products.
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Last year, California parents sued ChatGPT maker OpenAI after their son Adam Raine died by suicide. ChatGPT, the lawsuit alleged, provided information about suicide methods, including the one the teen used to kill himself. OpenAI has said it takes safety seriously and rolled out new parental controls on ChatGPT.
The lawsuits have spurred more scrutiny from parents, child safety advocates and lawmakers, including in California, who passed new laws last year aimed at making chatbots safer. Teens are increasingly using chatbots both at school and at home, but some have spilled some of their darkest thoughts to virtual characters.
“We cannot allow AI companies to put the lives of other children in danger. We’re pleased to see these families, some of whom have suffered the ultimate loss, receive some small measure of justice,” said Haley Hinkle, policy counsel for Fairplay, a nonprofit dedicated to helping children, in a statement. “But we must not view this settlement as an ending. We have only just begun to see the harm that AI will cause to children if it remains unregulated.”
One of the most high-profile lawsuits involved Florida mom Megan Garcia, who sued Character.AI as well as Google and its parent company, Alphabet, in 2024 after her 14-year-old son, Sewell Setzer III, took his own life.
The teenager started talking to chatbots on Character.AI, where people can create virtual characters based on fictional or real people. He felt like he had fallen in love with a chatbot named after Daenerys Targaryen, a main character from the “Game of Thrones” television series, according to the lawsuit.
Garcia alleged in the lawsuit that various chatbots her son was talking to harmed his mental health, and Character.AI failed to notify her or offer help when he expressed suicidal thoughts.
“The Parties request that this matter be stayed so that the Parties may draft, finalize, and execute formal settlement documents,” according to a notice filed on Wednesday in a federal court in Florida.
Parents also sued Google and its parent company because Character.AI founders Noam Shazeer and Daniel De Freitas have ties to the search giant. After leaving and co-founding Character.AI in Menlo Park, Calif., both rejoined Google’s AI unit.
Google has previously said that Character.AI is a separate company and the search giant never “had a role in designing or managing their AI model or technologies” or used them in its products.
Character.AI has more than 20 million monthly active users. Last year, the company named a new chief executive and said it would ban users under 18 from having “open-ended” conversations with its chatbots and is working on a new experience for young people.
Paramount’s campaign to acquire Warner Bros. Discovery was dealt another blow Wednesday after Warner’s board rejected a revised bid from the company.
The board cited the enormous debt load that Paramount would need to finance its proposed $108-billion takeover.
Warner’s board this week unanimously voted against Paramount’s most recent hostile offer — despite tech billionaire Larry Ellison agreeing in late December to personally guarantee the equity portion of Paramount’s bid. Members were not swayed, concluding the bid backed by Ellison and Middle Eastern royal families was not in the best interest of the company or its shareholders.
Warner’s board pointed to its signed agreement with Netflix, saying the streaming giant’s offer to buy the Warner studios and HBO was solid.
The move marked the sixth time Warner’s board has said no to Paramount since Ellison’s son, Paramount Chief Executive David Ellison, first expressed interest in buying the larger entertainment company in September.
In a Wednesday letter to investors, Warner board members wrote that Paramount Skydance has a market value of $14 billion. However, the firm is “attempting an acquisition requiring $94.65 billion of [debt and equity] financing, nearly seven times its total market capitalization.”
The structure of Paramount’s proposal was akin to a leveraged buyout, Warner said, adding that if Paramount was to pull it off, the deal would rank as the largest leveraged buyout in U.S. history.
“The extraordinary amount of debt financing as well as other terms of the PSKY offer heighten the risk of failure to close, particularly when compared to the certainty of the Netflix merger,” the Warner board said, reiterating a stance that its shareholders should stick to its preferred alternative to sell much of the company to Netflix.
The move puts pressure on Paramount to shore up its financing or boost its cash offer above $30 a share.
However, raising its bid without increasing the equity component would only add to the amount of debt that Paramount would need to buy HBO, CNN, TBS, Animal Planet and the Burbank-based Warner Bros. movie and television studios.
Paramount representatives were not immediately available for comment.
“There is still a path for Paramount to outbid Netflix with a substantially higher bid, but it will require an overhaul of their current bid,” Lightshed Partners media analyst Rich Greenfield wrote in a Wednesday note to investors. Paramount would need “a dramatic increase in the cash invested from the Ellison family and/or their friends and financing partners.”
Warner Bros. Discovery’s shares held steady around $28.55. Paramount Skydance ticked down less than 1% to $12.44.
Netflix has fallen 17% to about $90 a share since early December, when it submitted its winning bid.
The jostling comes a month after Warner’s board unanimously agreed to sell much of the company to Netflix for $72 billion. The Warner board on Wednesday reaffirmed its support for the Netflix deal, which would hand a treasured Hollywood collection, including HBO, DC Comics and the Warner Bros. film studio, to the streaming giant. Netflix has offered $27.75 a share.
“By joining forces, we will offer audiences even more of the series and films they love — at home and in theaters — expand opportunities for creators, and help foster a dynamic, competitive, and thriving entertainment industry,” Netflix co-Chief Executives Ted Sarandos and Greg Peters said in a joint statement Wednesday.
After Warner struck the deal with Netflix on Dec. 4, Paramount turned hostile — making its appeal directly to Warner shareholders.
Paramount has asked Warner investors to sell their shares to Paramount, setting a Jan. 21 deadline for the tender offer.
Warner again recommended its shareholders disregard Paramount’s overtures.
Warner Bros.’ sale comes amid widespread retrenchment in the entertainment industry and could lead to further industry downsizing.
The Ellison family acquired Paramount’s controlling stake in August and quickly set out to place big bets, including striking a $7.7-billion deal for UFC fights. The company, which owns the CBS network, also cut more than 2,000 jobs.
Warner Bros. Discovery was formed in 2022 following phone giant AT&T’s sale of the company, then known as WarnerMedia, to the smaller cable programming company, Discovery.
To finance that $43-billion acquisition, Discovery took on considerable debt. Its leadership, including Chief Executive David Zaslav, spent nearly three years cutting staff and pulling the plug on projects to pay down debt.
Paramount would need to take on even more debt — more than $60 billion — to buy all of Warner Bros. Discovery, Warner said.
Warner has argued that it would incur nearly $5 billion in costs if it were to terminate its Netflix deal. The amount includes a $2.8-billion breakup fee that Warner would have to fork over to Netflix. Paramount hasn’t agreed to cover that amount.
Warner also has groused that other terms in Paramount’s proposal were problematic, making it difficult to refinance some of its debt while the transaction was pending.
Warner leaders say their shareholders should see greater value if the company is able to move forward with its planned spinoff of its cable channels, including CNN, into a separate company called Discovery Global later this year. That step is needed to set the stage for the Netflix transaction because the streaming giant has agreed to buy only the Warner Bros. film and television studios, HBO and the HBO Max streaming platform.
However, this month’s debut of Versant, comprising CNBC, MS NOW and other former Comcast channels, has clouded that forecast. During its first three days of trading, Versant stock has fallen more than 20%.
Warner’s board rebuffed three Paramount proposals before the board opened the bidding to other companies in late October.
Board members also rejected Paramount’s Dec. 4 all-cash offer of $30 a share. Two weeks later, it dismissed Paramount’s initial hostile proposal.
At the time, Warner registered its displeasure over the lack of clarity around Larry Ellison’s financial commitment to Paramount’s bid. Days later, Ellison agreed to personally guarantee $40.4 billion in equity financing that Paramount needs.
David Ellison has complained that Warner Bros. Discovery has not fairly considered his company’s bid, which he maintains is a more lucrative deal than Warner’s proposed sale to Netflix. Some investors may agree with Ellison’s assessment, in part, due to concerns that government regulators could thwart the Netflix deal out of concerns about the Los Gatos firm’s increasing dominance.
“Both potential mergers could severely harm the viewing public, creative industry workers, journalists, movie theaters that depend on studio content, and their surrounding main-street businesses, too,” Matt Wood, general counsel for consumer group Free Press Action, testified Wednesday during a congressional committee hearing.
“We fear either deal would reduce competition in streaming and adjacent markets, with fewer choices for consumers and fewer opportunities for writers, actors, directors, and production technicians,” Wood said. “Jobs will be lost. Stories will go untold.”
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.
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)
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.”
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