California's ballot initiative system allows anyone to place measures on the state ballot by gathering sufficient signatures. This year, the Service Employees International Union (SEIU) has placed the 2026 Billionaire Tax Act — a 5% wealth tax on California's billionaires — before voters.
The proposal faces significant criticism. It taxes \"unrealized gains,\" such as a founder's shares in a private company that hasn't been sold yet. This threatens Silicon Valley's model of building startups worth billions on paper before founders see any cash. Since most billionaires keep most of their wealth in stocks, any wealth tax must account for this.
Wealth tax experts note there are better approaches to reach unrealized gains — for example, taxing at liquidation and treating death as a virtual liquidation event. Other wealth tax proposals have included these mechanisms; the California proposal does not.
The measure also values company stakes by voting rights rather than ownership, so a founder who maintains control despite dilution might be taxed more than they actually possess. Garry Tan explains the math with reference to Google.
Flaws in the Proposal
Current Affairs pushes back, noting that the proposal exempts public companies like Google. While private companies would still be affected, founders could easily win an exemption based on a provision allowing them to appeal nonsensical results.
Critics might note this defense seems weak: legislation is supposed to be good, not so bad that its victims can easily win on appeal.
The tax is retroactive, applying to billionaires who lived in California in January even though it won't appear on the ballot until November. Proponents argue this prevents billionaire flight; opponents point out that billionaires could flee before the tax passes — and some already have.
One likely outcome is that the tax fails at the ballot or in court, but only after driving California's richest taxpayers to flee, leading to a net decrease in state revenue. Some analysts propose it could decrease revenues even if passed, if enough billionaires leave.
Pirate Wires interviewed 21 California tech billionaires; 20 were \"developing an exit plan.\" An insider said: \"if this tax actually passes, I think the technology industry kind of has to leave the state.\"
Governor Gavin Newsom — hardly an anti-tax conservative — called it \"makes no sense\" and \"would be really damaging.\"
Who Is Behind This?
The proposal isn't sponsored by generic leftists. It's the project of SEIU, a union of mostly healthcare workers.
This clarifies whether it's net negative for state revenue: 90% of the tax's revenue is earmarked for healthcare spending. So even if it's net negative for the state, it isn't net negative for the healthcare budget — specifically not for the people sponsoring the measure.
SEIU has perfected what California political circles call \"extortion via ballot initiative.\" Their strategy: propose a ballot initiative that sounds appealing to voters but is designed to ruin an industry; then demand concessions from that industry in exchange for withdrawing the initiative.
Their first attempt was the 2014 Fair Healthcare Pricing Act, which would have capped hospital procedure charges at unsustainable levels. The hospital association viewed this as existential threat — if approved, hospitals could not operate as they do now.
\"Which services must be eliminated or cutback?\" > \"How can the hospital operate without departmental cross-subsidization?\"
The government's fiscal analysis agreed: about 20 hospitals would change from positive operating margins to losses. But SEIU offered to withdraw the measure in exchange for a $100 million \"donation\" from hospital lobby groups to one of their pet causes, plus the right to expand their union into affected hospitals.
The hospitals caved. Union leader Dave Regan celebrated: \"For a $5 million investment, we get an $80 million turn.\" Buoyed by success, SEIU targeted dialysis clinics next, demanding similar union expansion rights. The clinics refused.
Three Strikes at the Ballot
In 2018, SEIU proposed the Eternal Kidney Proposition to cap dialysis clinic revenues. The clinics spent $100 million fighting it — \"the most money raised for a campaign like this in California history\" — and it failed.
In 2020, SEIU proposed new regulations with the same effect: making clinics ruinously expensive to operate. The measures were opposed by the California Medical Association, American Nursing Association, patient groups, and NAACP. Once again, dialysis clinics spent $100 million getting the message out, and voters rejected it.
In 2022, SEIU proposed essentially the same packet. All the same groups lined up against, now joined by additional medical associations. After wasting another $100 million, the proposition was defeated a third time.
One dialysis proposition might be happenstance; two might be coincidence. Three was enemy action.
Wake of Public Awareness
In 2020, media nonprofit CalMatters published \"Good Policy Or Ballit Blackmail?\" trying to spread awareness of SEIU's tactics. The article focuses on Dave Regan:
[SEIU] sponsored Proposition 23 on the November ballot, which would add new regulations for dialysis clinics. It put a similar measure before voters in 2018, which they rejected. In the last two elections, it's also sponsored measures to tax hospitals in Lynwood and cap prices at Stanford hospitals.
That doesn't count initiatives SEIU began working on by collecting signatures but withdrew before reaching the ballot — including minimum wage initiatives, measures limiting hospital fees and executive pay, and other regulations.
All told, these campaigns cost the union at least $43 million, with no wins on California ballots — though Regan says they've helped make progress in other ways.
\"Dave Regan has made this into a strategy,\" said Ken Jacobs, chair of UC Berkeley Labor Center. > \"There's great resentment toward him because of his 'my way or the highway' kind of way of dealing with other folks,\" said Sal Rosselli, who worked with Regan as part of the larger SEIU umbrella union.
\"He's not doing it to improve the quality of health care... He's doing it to gain leverage over the employers for top-down organizing rights.\"
Wall Street Journal agreed. Even the more liberal Los Angeles Times described SEIU's work as \"political extortion.\"
Is This Another Extortion Attempt?
The argument against: SEIU is entirely focused on healthcare and doesn't care about tech.
The argument in favor: Gavin Newsom cares about the tech industry, and SEIU cares about Newsom.
Governor Newsom has been eyeing the Democratic presidential nomination in 2028. He needs a reputation as a Sensible Moderate and plenty of billionaire donors. There's a clear path to the latter — as Silicon Valley tires of Trump's random acts of economic devastation, some tech leaders are starting to regret their flirtation with right-wing populism and wonder whether the other side has a better offer.
Instead, there's this wealth tax, coming at the worst possible time. Newsom really wants it to go away.
\"We've been at this for four months,\" Newsom said in an interview with Politico, describing an \"all-hands\" effort that included meeting one-on-one with SEIU-UHW's leader, Dave Regan.
A compromise does not appear imminent. A union official cast doubt on the possibility of a deal, saying the two sides do not currently have another meeting scheduled and framing a ballot fight as an inevitability.
The Underlying Critique
Critics might note this analysis oversimplifies: SEIU's healthcare focus genuinely aligns with their mission, and Newsom's political ambitions don't necessarily explain why they'd target tech specifically. Still, the pattern of past initiatives suggests something more than heartfelt redistribution is at work.
This appears to be a heads-I-win-tails-you-lose gambit by the SEIU. If Governor Newsom offers enough concessions and bribes, they'll drop the initiative. If not, they'll carry it through, maybe win, and get billions in extra healthcare spending — some of which flows to their members. Whatever happens to the rest of the state isn't their concern.
One critique of capitalism argues that although theory aligns incentives so companies produce what people want, practice also incentivizes finding loopholes: addictive products that exploit wedges between what people will buy and what's good for them. Cigarettes, casinos, payday loans, and social media all demonstrate these wedges form a multi-trillion dollar niche.
SEIU seems to have found a bug in direct democracy: it incentivizes interest groups to search for the most destructive possible ballot initiative that might nevertheless get approved by low-information voters, since this gives them leverage over anyone willing to bribe them into withdrawing their poison pill.