California's Billionaire Tax Could Bring Down Gavin Newsom

Gavin Newsom’s run for the White House is going from bad to worse. Last week, his former chief of staff was arrested for allegedly siphoning off campaign funds for personal use, raising questions about the California Governor’s control of his inner circle. Now a bigger challenge looms: a rising socialist tide.

After Zohran Mamdani’s sweep to the New York mayoralty and a similarly high-profile win for Katie Wilson in Seattle, California progressives are eyeing a new billionaire tax initiative — a policy Newsom is staunchly against. The union-backed legislation would see the state’s richest residents hit with a one-time, 5% tax on the net worth of individuals — including everything from investments to property value, and even other assets like jewellery and paintings — worth over $1 billion. The revenue would go into a special fund with 90% reserved for healthcare spending and 10% for the state’s ailing K-12 education system.

Newsom likes to claim that California is “the envy of the world” when it comes to social justice. In reality, the state suffers from the highest poverty rate in the country and maintains the highest unemployment, which is particularly acute among young people under 30. To top it off, the level of inequality is greater than Mexico and closer to countries such as Guatemala and Honduras: hardly the envy of the Americas, let alone the world.

In the past, Newsom sought to stifle debate about the dire condition of the state by building what The Nation called an ideal “blue welfare state” — a model of government based on European democracies that prioritises welfare. But economic and budget conditions suggest the state is running out of money and cannot continue handing out ever bigger subsidies to poorer residents. California spends more of its budget on welfare than almost any other state, twice as much as arch-rival Texas.

Even larger infrastructure projects are facing problems. Many state transit agencies and hospitals have huge deficits and are seeking for more state aid, while the troubled “bullet train” is also short of financing. To make matters worse, it could take upwards of $100 billion more to address the state’s consistently awful homelessness situation. In the long run, some have noted that California and Newsom face a tsunami of payments with trillions of dollars in pension debt set to rear its head. It’s therefore no surprise that, despite the tech boom, California places 42nd in fiscal health among the American states.

But will a levy on billionaires fix the situation? Although the wealth tax could help to address the budget deficit, it could also ramp up the departure of the wealthy residents — the top 1% of taxpayers pay more than 40% of California’s personal income. California, like New York and New Jersey, has suffered a drain of wealthy taxpayers already, losing over $300 billion in tax revenues over the past decade. This is mainly to the benefit of other — usually red — states.

Newsom, then, finds himself in a bind. The California Governor must look to keep his historical support base while simultaneously making himself the self-appointed leader of the Resistance. His stance against the wealth tax will not be popular with progressives, but massive income redistribution resonates with many voters in the home base of some of America’s wealthiest citizens.

Read the rest of this piece at: UnHerd.

Joel Kotkin is the author of The Coming of Neo-Feudalism: A Warning to the Global Middle Class. He is the Roger Hobbs Presidential Fellow in Urban Futures at Chapman University and and directs the Center for Demographics and Policy there. He is Senior Research Fellow at the Civitas Institute at the University of Texas in Austin. Learn more at joelkotkin.com and follow him on Twitter @joelkotkin.

Homepage photo: Gage Skidmore via Flickr, under CC 2.0 License.