Taxing the rich to fund social services is not a new idea. But an attempt to do it in California has met an unusually potent backlash.

That's because the proposed 2026 Billionaire Tax Act has split two of the most powerful forces in California politics: unions and Silicon Valley. The division became clear last week, when tech influencers clashed online with elected officials and labor leaders who support the wealth tax.

Congressman Ro Khanna, a Democrat from Fremont, used his own social media platform to praise the wealth tax concept and gamely debate opponents. (He advocates for "common sense workarounds for startup founders whose companies are not profitable and who have illiquid stock," according to spokesperson Sarah Drory). Gov. Gavin Newsom, who is widely considered a future Democratic nominee for president, came out against the tax but largely dodged the social media fray.

Meanwhile, elite venture capitalists such as Peter Thiel and Google co-founder Larry Page are floating plans to move some of their business out of state, according to a report from the New York Times. Tan believes that a mass flight of entrepreneurs and investors could stymie California's economy "and ultimately make it harder, not easier, to support health care" and other essential needs, he said in a statement to the Chronicle. The Y Combinator chief is not a billionaire and would not be impacted by the tax measure if it passes.

Suzanne Jimenez, chief of staff for Service Employees International Union-United Healthcare Workers West, the group spearheading the 2026 tax, has little patience for the threats of a billionaire exodus.

"Honestly, this is a familiar Chicken Little argument," Jimenez said, referring to an old fable about blind panic and fear mongering. She and other proponents believe the 2026 tax initiative, which would require California residents with at least $1 billion net worth to chip in 5% of their wealth over five years, is a reasonable ask.

Ninety percent of the money would help patch a $100 billion in cuts to the state's health care system, triggered by the "One Big Beautiful" budget bill that Congress passed in July. The remaining 10 percent of funds would be directed toward food assistance programs and public education.

Without an immediate funding stream, hospitals might close, emergency room waits would increase and the cost of insurance premiums would spike, Jimenez warned. She noted that the billionaire tax is designed as a one-time imposition, so no rich person would face an ongoing burden.

Backers of the tax measure still have to gather nearly 900,000 signatures to get it on the November ballot, but say they already have a strong coalition and will soon roll out political endorsements. Economic inequality is a raw topic in California and nationally, though Zohran Mamdani's mayoral win in New York City shows an appetite for change.

When it comes to the redistribution of resources, however, no approach is universally palatable. Not in a state where the most prosperous individuals also have the most political juice.

Newsom has signaled his fear of driving innovation to other states in his public comments about the billionaire tax. Spokespeople for the governor told the Chronicle he has "consistently opposed" past efforts to enact wealth taxes in the state, and that his position "has not changed."

Related Reading

New California law means a big change for grocery shoppers in 2026

Box truck with 500 frozen turkeys stolen from California charity

3.2-magnitude earthquake shakes San Mateo County

Subscribe

There’s more to San Francisco with the Chronicle. Subscribe today for just 25¢.