JUST IN: VOTE REVERSED — GAVIN NEWSOM BLINDSIDED BY HIS OWN PARTY
CALIFORNIA DEMOCRATS JUST DEFIED GAVIN NEWSOM—AND THE FIGHT IS BIGGER THAN ONE TAX
SACRAMENTO, Calif. — Gavin Newsom had already made his position clear.
California, he warned, should not try to tax its billionaires alone.
If the state imposed a major wealth levy while the rest of the country did nothing, the people being targeted could simply leave—and take future tax revenue, investment and jobs with them.
Xavier Becerra, the Democratic nominee hoping to succeed him as governor, took essentially the same position.
Then their own party ignored them.
After a weekend of heated debate in San Diego, the California Democratic Party formally endorsed Proposition 40, a November ballot measure that would impose a one-time 5 percent tax on the accumulated wealth of roughly 200 billionaires.
The vote did more than place the party behind a controversial tax.
It exposed a widening struggle over who now controls the direction of California Democrats: the elected leaders who run the state, or the activists and labor organizations demanding that the party move further left.
Newsom and Becerra were not defeated by Republicans.
They were overruled by their own side.
The endorsement followed an initial recommendation from the party’s resolutions committee on Saturday.
By Sunday, after a contested floor fight, more than 60 percent of the party’s executive-board delegates had voted to make support for Proposition 40 the official position of the California Democratic Party.
That result gave the measure a powerful organizational boost heading toward the November 3 election.
It also handed Newsom one of the clearest public rebukes of his final year as governor.
For years, Newsom has presented himself as both a progressive national figure and a defender of California’s economic competitiveness.
Proposition 40 is now forcing him to choose which part of that identity matters more.
The measure’s supporters argue that the choice should be easy.
They say California is facing enormous pressure on healthcare, food assistance and education after federal funding reductions under the Trump administration.
A state with extraordinary private wealth, they argue, should ask its richest residents to prevent vulnerable Californians from absorbing those losses.
The campaign estimates that the tax could raise approximately $100 billion over several years.
Its targets would be extraordinarily narrow.
Only people and trusts with more than $1 billion in covered assets would be subject to the levy.
For everyone else, supporters say, nothing would change.
That argument has attracted some of the most prominent voices on the Democratic left.
Sen. Bernie Sanders has endorsed the measure.
Rep. Ro Khanna has backed it.
SEIU United Healthcare Workers West, led by Dave Regan, has spent months building the campaign and pushing the initiative from petition drive to statewide ballot.
AFSCME California and the California Teamsters have also offered support.
To them, Proposition 40 is not an attack on success.
It is a one-time emergency response aimed at people whose fortunes have grown far beyond anything ordinary income-tax rules were designed to reach.
But opponents are asking a different question.
What happens after the billionaires pay once—or decide not to remain in California long enough to be taxed again?
Newsom’s objection has always centered on mobility.
Income can be taxed when it is earned.
Wealth is different.
It can consist of stock, private companies, real estate, intellectual property and other assets whose value may be difficult to calculate and whose owners may have the resources to relocate, litigate or restructure their holdings.
California already imposes the highest top marginal state income-tax rate in the nation.
Adding a 5 percent assessment on net worth would test how much additional burden the state’s richest residents are willing to accept before moving to Florida, Texas, Nevada or another lower-tax jurisdiction.
Newsom argues that a federal wealth tax would avoid that problem because relocation inside the United States would no longer provide an escape.
The political weakness in his position is obvious.
A federal billionaire tax would require approval from Congress.
Under the current balance of power in Washington, that is largely theoretical.
Proposition 40 is real.
It is already on the ballot.
And California voters will decide its fate this November.
That leaves Newsom opposing an immediate progressive proposal while promoting a national alternative that has little chance of becoming law anytime soon.
The party’s activists noticed.
So did Becerra.
The former health and human services secretary announced his positions on several ballot measures one day before the committee vote.
He endorsed Proposition 3, which would permanently extend an existing income-tax surcharge on high earners to fund education.
But he declined to support the billionaire tax.
That placed him beside Newsom on the most divisive fiscal question facing the state party.
The delegates moved in the opposite direction.
Their vote showed that support for aggressive wealth taxation is no longer confined to the outer edge of California politics.
It now commands enough strength inside the Democratic Party to overcome direct opposition from both the sitting governor and the party’s chosen successor.
That is the fracture Newsom cannot easily explain away.
For years, California Democrats have maintained near-total control of state government.
They hold every statewide constitutional office.
They dominate both legislative chambers.
They face little meaningful Republican resistance in most statewide contests.
When a party controls that much power, its most consequential battles often move inside the coalition.
Moderates, organized labor, progressive activists, public-sector unions, environmental groups and business-aligned Democrats begin fighting one another over what governing power should actually be used to accomplish.
Proposition 40 has brought that argument into the open.
Newsom’s camp sees a state already at risk of losing high-income residents, entrepreneurs and investment capital.
The measure’s supporters see a state where billionaires have accumulated enormous fortunes while public services face cuts.
Both sides agree that California’s healthcare system is under pressure.
They disagree over whether the richest residents are the solution—or whether targeting them could make the state’s finances even less stable.
That dispute has split organized labor as well.
SEIU-UHW is driving the campaign.
But the broader SEIU California executive board recently chose to remain neutral.
The California State Council of Laborers opposes the measure.
The California Police Chiefs Association has also come out against it.
The California Teachers Association, one of the most powerful forces in state politics, has opposed the proposal as well.
The California Federation of Labor Unions has faced intense pressure from both sides as unions decide whether the short-term revenue promised by the tax outweighs concerns about long-term economic consequences.
This is not the usual confrontation between labor and business.
It is a fight within labor itself.
Some unions see Proposition 40 as the only realistic way to replace federal dollars and protect healthcare access.
Others fear that an unstable, one-time revenue source could be used to create spending commitments the state cannot sustain.
That concern reaches beyond ideology.
A one-time tax can fill an immediate hole.
It cannot automatically fund permanent programs forever.
If the measure raises less than projected—or if wealthy residents leave and future income-tax collections decline—the state could face another budget crisis after the temporary money is gone.
Supporters respond that the scale of the federal cuts demands an emergency answer.
Waiting for a perfect long-term solution, they argue, would mean allowing hospitals, clinics, schools and food programs to absorb damage now.
For them, the risk of doing nothing is greater than the risk of losing some wealthy residents.
The campaign’s economic assumptions will now receive far more scrutiny.
Backers project a roughly $100 billion haul.
Opponents say wealth is difficult to value and even harder to collect from people with armies of accountants, lawyers and tax planners.
Some of California’s best-known billionaires have already funded a massive campaign against the initiative.
Google co-founder Sergey Brin has contributed tens of millions of dollars to opposition efforts.
Other wealthy technology and finance figures are expected to spend heavily before November.
That money guarantees that voters will hear two radically different versions of the same proposal.
In one version, Proposition 40 is a limited act of tax fairness.
Two hundred people sacrifice a small share of immense fortunes so millions of Californians can preserve healthcare and other essential services.
In the other, it is an economic warning shot.
California tells its most productive and mobile residents that accumulated wealth itself is no longer secure, prompting capital and future tax revenue to flee.
Neither side will lack resources to make its case.
The campaign could become one of the most expensive ballot-measure fights in California history.
For Newsom, the timing is particularly uncomfortable.
He is nearing the end of his governorship while continuing to cultivate a national profile.
He has not concealed his interest in shaping the Democratic Party’s future and is widely viewed as a possible presidential contender.
That makes California’s billionaire-tax debate more than a state issue.
It is a preview of the argument national Democrats may soon have over wealth, inequality and the economic identity of the party.
Newsom wants to present himself as someone who can defend progressive values without ignoring economic consequences.
His critics on the left increasingly view that posture as caution bordering on surrender.
They argue that Democrats cannot campaign against inequality while refusing to tax the people who have benefited most from it.
Newsom’s allies answer that governing requires more than identifying a popular target.
A policy can feel morally satisfying and still damage the revenue base that funds public programs.
The official party endorsement means Newsom can no longer keep that argument at arm’s length.
If he campaigns aggressively against Proposition 40, he will be campaigning against the declared position of the California Democratic Party.
If he softens his opposition, he risks appearing to retreat under pressure from activists.
If he remains mostly silent, both sides may accuse him of avoiding the defining economic fight of the year.
Becerra faces an equally difficult choice.
As the Democratic nominee for governor, he needs the activists and union members who just endorsed the tax.
He also wants to inherit a functioning state economy and avoid frightening the business community months before taking office.
His refusal to support the measure may reassure moderates.
It could also convince progressive delegates that the next administration will continue Newsom’s cautious approach.
That tension will follow him through the fall campaign.
Republicans, meanwhile, have been handed a powerful line of attack.
They can portray California Democrats as determined to drive successful residents and companies out of the state.
But Republicans remain weak statewide, and the most important opposition to Proposition 40 is coming from Democrats themselves.
That makes the fight harder to dismiss as ordinary partisan warfare.
Newsom is not repeating a Republican talking point from the sidelines.
He is warning his own party that the measure could cost California more than it collects.
The party has chosen not to listen.
The personal controversies surrounding Newsom have added to the sense that his political authority is being tested.
Recent attention has focused on a past extramarital affair that Newsom publicly acknowledged years ago after a woman involved spoke again about it.
Federal investigators have also reportedly examined matters involving his wife, Jennifer Siebel Newsom, her taxes and nonprofit organizations connected to the couple.
Newsom has denied wrongdoing and accused the Trump administration of using federal law enforcement for political retaliation.
Those disputes are separate from Proposition 40.
There is no public evidence that the party endorsement was driven by Newsom’s personal controversies or the federal inquiries.
But political power is often measured by whether allies follow when a leader gives a warning.
On this issue, they did not.
The rejection is especially striking because Newsom has spent years dominating California Democratic politics.
He survived a recall.
He won reelection easily.
He shaped state budgets, national messaging and the party’s response to Republican governors across the country.
Now, as his term nears its end, activists are signaling that they do not intend to let him define the party’s next chapter alone.
Proposition 40 is their declaration of independence.
The measure may pass.
It may fail.
Its revenue estimate may prove accurate, or the warnings of capital flight may prove justified.
Those questions will be answered only after voters act and, if the measure passes, after years of litigation, valuation disputes and collection efforts.
The political meaning is already clear.
California Democrats have decided that the risk of confronting billionaires is worth taking.
Their governor has decided that the risk to California is too great.
Their nominee for governor agrees with him.
The party’s organized base does not.
That is not a minor disagreement over tax policy.
It is a battle over what Democratic power is for.
Is it meant to protect public services even when doing so threatens economic flight?
Or is it meant to preserve the tax base and economic growth that make those services possible?
Can California tax extreme wealth without pushing it out?
Or has the state finally reached the point where its most progressive ambitions collide with the limits of geography, capital and human behavior?
Newsom believes the answer requires national action.
His party has decided it is no longer willing to wait.
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And after this weekend’s vote, the central question facing California Democrats is no longer whether they are divided.
It is which side will still control the party after voters decide who was right.
