California Gov. Gavin Newsom is calling for a national tax on the ultra-wealthy while opposing a California ballot measure that would tax billionaires in his own state, creating a sharp divide among Democrats over how to address inequality, public spending and the growing power of Silicon Valley.
Newsom’s proposal came shortly after California officials certified a ballot measure that would impose a one-time 5% tax on residents worth more than $1 billion. The measure, known as the California Billionaire Tax Act, is backed by SEIU-United Healthcare Workers West and is designed to raise money for healthcare, education and food assistance programs.
Supporters say the measure has strong public backing after organizers collected more than 1.6 million signatures. They argue that California’s wealthiest residents have benefited enormously from the state’s economy and should contribute more at a time when public services face rising costs and federal funding pressures.
Newsom strongly disagrees with the state-level approach. In a public statement, he said he understands the frustration behind the proposal but believes a California-only wealth tax would be ineffective and potentially damaging. His main argument is that billionaires can move their assets, legal residence or financial structures to lower-tax states much more easily than ordinary families can move their jobs, homes and children.
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That warning has become central to the debate. California has more billionaires than any other state, but it also relies heavily on high-income earners for tax revenue. Critics of the ballot measure say adding another targeted tax could make the state budget even more volatile, especially if wealthy residents leave or restructure their finances.
Several labor, healthcare and education groups have also opposed the measure, warning that it could threaten long-term funding for schools, clinics, public safety and infrastructure if revenue becomes unstable. Their concern is not necessarily that billionaires should never pay more, but that a narrow state tax may be too easy to avoid and too risky for a state budget already tied to stock-market performance.
But Newsom’s position has angered some progressives, including California Rep. Ro Khanna, who supports the ballot measure. Khanna has argued that fears of a billionaire exodus are overstated and that California remains a global center for venture capital, technology and innovation. He has criticized Newsom for opposing a measure that progressives see as a direct way to challenge extreme wealth concentration.
The dispute shows a larger divide inside the Democratic Party. One side wants states to act immediately, especially when Congress is divided and national tax reform is difficult. The other side argues that wealth taxation only works if it is federal, because the ultra-rich can move across state lines and use sophisticated tax planning to avoid state-level rules.
Newsom’s counterproposal is a national economic plan. He wants a federal minimum tax on people with net worths above $100 million, new limits on wealthy individuals borrowing against stock portfolios to fund lifestyles without selling assets, changes to inheritance rules and higher corporate tax rates closer to levels before the 2017 Republican tax cuts.
He also introduced a broader idea tied to artificial intelligence: a national public equity fund that would give Americans a stake in the growth of major AI companies. Newsom argues that if AI reshapes the economy and displaces workers, ordinary Americans should share in the wealth created by that transformation rather than leaving all gains to founders, executives and investors.
That AI proposal is likely to draw attention beyond California. As artificial intelligence becomes more central to the economy, policymakers are increasingly asking who benefits from the technology and who pays the cost when jobs change or disappear. A public equity fund would represent a major shift in how the government thinks about private innovation and national wealth.
For ordinary taxpayers, the issue is not only about billionaires. It is about how governments pay for healthcare, schools, childcare, worker retraining and other public services. If the state measure passes, California could attempt to raise major new revenue from a small number of ultra-wealthy residents. If Newsom’s approach gains traction, the fight would move to Washington, where any national wealth-tax plan would face major legal, political and business opposition.
Politically, Newsom’s move also looks like part of a broader national positioning effort. He is widely discussed as a possible 2028 presidential candidate and has been building a profile as one of Donald Trump’s most visible Democratic critics. By backing a federal wealth-tax framework while opposing California’s ballot measure, Newsom appears to be trying to sound populist on inequality while still presenting himself as cautious on state finances and economic competitiveness.
The challenge is that both sides can claim they are trying to protect public services. Supporters of the California measure say immediate action is needed to fund healthcare and education. Opponents say a poorly designed state tax could push wealth away and weaken the very services it is meant to support.
The debate is likely to grow louder as the ballot campaign moves forward. Billionaire tax proposals once sat mostly on the progressive edge of Democratic politics. Now they are becoming a mainstream test of how the party talks about inequality, technology and the power of the ultra-rich.
Why It Matters
The fight over California’s billionaire tax could shape national Democratic economic policy. For voters, the debate affects healthcare, education, food assistance and future tax policy. For businesses and investors, it raises questions about whether California will remain attractive to high-growth companies and wealthy founders. For workers, Newsom’s AI proposal adds a new question: whether ordinary Americans should share financially in the next wave of technological growth.
What Comes Next
California voters will decide the billionaire tax measure at the ballot box. Newsom is expected to keep promoting his national alternative, while supporters such as Ro Khanna and labor-backed organizers will argue that the state should act now. The fight could become a preview of 2028 Democratic economic politics, especially as candidates debate wealth inequality, AI disruption and how to fund public programs.
The debate also exposed a split among California Democrats, with Rep. Ro Khanna criticizing Newsom’s opposition to the state-level billionaire tax measure.
Ro Khanna blasts ‘hypocrisy’ of Gavin Newsom supporting a national billionaire tax https://t.co/6snHQZjO3R pic.twitter.com/UTl8Zq0G4r
— New York Post (@nypost) June 26, 2026
