California mulls a billionaire tax, revealing a deeply divided state

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San Francisco, United States – Karen Sanchez has seen S, a man in his 30s with Down syndrome, every few months for the last 10 years that she has worked in an outpatient laboratory in a hospital in Antelope Valley, a rural part of Los Angeles County.

S comes with an official caretaker and breaks into a smile when he sees Sanchez, with her now familiar purple hair, waiting in the lobby. She shows him in to get his bloodwork done, and then they do not meet for the next few months.

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Sanchez said she has been staying up late thinking of S and other patients with complex medical conditions, many of whom she has seen since their childhood. United States President Donald Trump’s One Big Beautiful Bill Act (OBBBA), passed in July 2025, would require S and other such patients to fill out paperwork every six months to determine their eligibility for Medi-Cal, the California version of the federally funded medical coverage programme known as Medicaid.

This is a complex task for patients like S, whose name is being withheld to protect patient privacy.

“It is hard for him to even grasp the changes,” Sanchez said.

The OBBBA sought to save $100bn in expenses by asking patients to fill out eligibility paperwork more often, increasing work requirements to maintain coverage for those who can work and eliminating those ineligible.

“He can’t understand why he has to fill forms so often,” Sanchez said about S. While he has a caretaker for now, she said, “patients like him can just fall through the cracks” in the new system.

Sanchez belongs to the California branch of the Service Employees International Union (SEIU-UHW) for health workers, which has proposed a billionaire tax, a one-time 5 percent tax on those who have assets of more than $1bn in the state, to make up for funds lost due to the federal retrenchment.

Senator Bernie Sanders, a Democrat from Vermont, will launch a campaign at a rally in Los Angeles on Wednesday evening to get 875,000 signatures so the tax can be voted on by California residents in the November midterms. If it passes, it will be applied retroactively from January 1 to anyone who had lived in the state then.

The proposed tax has already deeply divided the state.

Google cofounders Larry Page and Sergey Brin have reportedly bought houses in Florida and moved some of their companies with a view to shifting their tax status.

“This isn’t a tax on billionaires; it’s a tax on California’s economy,” said Patrick Kallerman, vice president at the Bay Area Council, a San Francisco-based business association.

Rob Lapsley, president of the California Business Roundtable, issued a statement ahead of Sanders’ rally saying, “this $100 billion tax increase isn’t just a swipe at California’s most successful entrepreneurs, it’s a tax no one can afford because it weakens the entire economic ecosystem that supports jobs, investment, wages, and public services for everyday Californians.”

California would be the world’s fourth-largest economy if it were a country, in part due to the technology giants in the Bay Area. Tech billionaires moving away could make the state’s finances precarious.

Governor Gavin Newsom, who recently announced a nearly $3bn budget deficit, partly due to the federal funding cuts, has already distanced himself from the ballot measure.

Billionaires should not move out of the state due to a tax that is unlikely to be passed, he told Bloomberg News.

Bay Area Council’s Kallerman said California should avoid policies that “could unintentionally discourage investment or make it harder for employers to expand here”.

But even as Sanders launches his statewide campaign this week, Sanchez has already spent most evenings after work at a nearby brewery, collecting the signatures needed by the end of April deadline.

Extreme wealth masks deep poverty

While the impact of the federal restrictions on Medicaid will be felt nationwide, California has 14.5 million recipients, more than any other state in the country.

More than a third of all its residents and half the children in the state are on Medi-Cal. This is not only because it is the most populous state, but also because it has not been as aggressive on performing eligibility checks as some other states, according to Marc Joffe, the president of the Contra Costa Taxpayers Association and a visiting fellow at the California Policy Center.

But others believe California’s extreme wealth masks the coexistence of deep poverty. Nearly 200,000 recipients could now lose their coverage due to the increased paperwork, said Suzanne Jiminez, chief of staff at the SEIU-UHW.

Darien Shanske, a law professor at the University of California at Davis, said it was the “moment of crisis” created by the OBBBA that had pushed him and others to draft the tax on the state’s estimated 200 billionaires. In exploring the various alternatives to make up for the lost funds due to Trump’s bill, he had thought about “the failure of income tax to reach the ultra wealthy”.

But critics of a billionaire tax, such as the California Policy Center’s Joffe, say that the estimates of those who would lose cover may be overblown.

For instance, he said, those who can work could be asked to work, get involved in the community or go to college in exchange for their coverage. New undocumented migrants will not be enrolled from this year, and they will have to pay $30 from next year onwards for their coverage.

“It’s not as big a deal as the unions say,” Joffe told Al Jazeera.

Most of all, it is the taxing of intangible assets, including equity shares, that has raised hackles. Successful startup founders often have their wealth in the form of equity in their companies, making them billionaires. But imposing a tax on this “punishes people for being innovative”, Joffe said. “There is the emotional aspect of it, the perceived injustice.”

This sentiment could be at the heart of the flurry of moves out of the state. Facebook founder Mark Zuckerberg is in talks to buy a $200m home in Miami, possibly becoming the latest of several billionaires to move out of California as the prospect of the billionaire tax looms, according to The Wall Street Journal.

Days before the January 1, 2026, applicable date for the tax, should it come into place, Google cofounders terminated or moved 15 related companies from the state, according to The New York Times.

Billionaires are also funding opposition to the tax. Palantir chairman Peter Thiel, who has also reportedly moved out of the state, donated $3m to a political committee of the California Round Table to oppose the measure. More such donations are expected to flow in.

But Jiminez of the SEIU-UHW said the idea of a flight of capital and talent “is a scare tactic that will not play out”.

A banner bearing portraits of Elon Musk, Jeff Bezos and Mark Zuckerberg with a slogan is seen during a demonstration against the World Economic Forum (WEF) on the eve of the WEF annual meeting in Davos on January 18, 2026. (Photo by Fabrice COFFRINI / AFP)

‘Litigated up to the Supreme Court’

At Sanchez’s hospital, she already sees an increasing number of patients paying for some part of their coverage, while the state covers a portion. Hers is the only trauma hospital for about 65km (40 miles), she said, and reduced Medi-Cal payments could lead to reduced hospital services.

“I keep imagining people driving long distances while having heart attacks or gunshot wounds,” she told Al Jazeera.

Rural hospitals, such as Sanchez’s, and home-based care could be particularly affected by the OBBBA cuts, analysts say. They are also strong sources of employment in these communities.

Sanchez spent Valentine’s Day evening and most evenings this month at a brewery near her house collecting signatures for the ballot measure from customers, while her kids did homework on a table nearby.

Daniel Schnur, a political analyst who also teaches at the University of California, Berkeley’s Institute of Government Studies, said that “it would be surprising if [the measure] didn’t qualify” for the November ballots. “The timing of it may be very effective.”

While many voters who have aspired to be wealthy may looked up to Silicon Valley billionaires, they have become more disenchanted, he said.

A 2025 Harris poll found that 94 percent of respondents said that a wealth gap exists, with corporate tax loopholes being a top driver behind the disparity. Some 71 percent of the respondents said they supported a wealth tax.

California’s billionaire tax proposal also found support in a poll conducted in January by the Mellman Group for a Republican strategist, with 48 percent respondents saying they supported it and 38 percent saying they did not.

With opinion deeply divided between the state’s unions on one side and its top taxpayers on the other, Newsom, who is in his final term as governor, could face a difficult balancing act ahead.

“What is the governor’s plan?” Sanchez asked about the increased paperwork and possible loss of Medi-Cal coverage for many residents.

Given that the loss of taxpayers due to the proposed billionaire’s tax could have a detrimental impact on the state’s already precarious budget, getting signatures for the measure could be just the beginning of a rocky path ahead.

“It is likely that Governor Newsom will try to find a legislative solution to this. Legislators could seek to modify the bill if it is acceptable to the movers,” Schnur said.

California Policy Center’s Joffe said that if the measure gets voted on in November, it could also face legal challenges, and “will be litigated up to the Supreme Court”.

Chamath Palihapitiya, a venture capitalist and conservative commentator, has said that with the billionaires moving their homes, the prospect of the tax has already led to $1 trillion leaving the state. It is not clear how he arrived at that figure.

But “this is paper mobility”, said Shanske, the bill’s co-author.

“People club where there is talent and amenities, and gutting healthcare will make the state less attractive.”

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