What if a union discovered it could hold California's democracy hostage -- not to pass good policy, but to extort money from the industries it targets? Scott Alexander exposes one of the most shameless chapters in California ballot history: a union that has perfected the art of political blackmail using propositions that sound progressive but function as weapons.
The Proposal's Problems
California lets interest groups propose measures for the state ballot. Anyone who gathers enough signatures -- currently 874,641 -- can put their plans before voters during the next election year.
This year, the big story is the 2026 Billionaire Tax Act, a 5% wealth tax on California's billionaires. Views on this will mostly be shaped by whether or not one likes taxing the rich, but opponents have argued that it's especially poorly written.
The measure includes a tax on "unrealized gains" -- like a founder's share of a private company which hasn't been sold yet. This could be an existential threat to 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 needs some way to reach these holdings. The "buy, borrow, die" strategy for avoiding taxation is a common complaint among tax experts. But there are better ways to do this -- for example, taxing at liquidation and treating death as a virtual liquidation event. Other wealth tax proposals have included these provisions.
The California proposal doesn't. It appears to value company stakes by voting rights rather than ownership, so a typical founder who maintains control despite dilution might see themselves taxed for more than they have. Garry Tan explains the math with reference to Google.
However, Current Affairs has a good article pushing back, saying the proposal exempts public companies like Google. Private companies would still be affected, but this would be so obviously unfair that founders would easily win an exemption based on a provision allowing them to appeal nonsensical results.
Critics might note that proposed legislation is generally supposed to be good, rather than so bad that its victims will easily win on appeal.
It's retroactive, applying to billionaires who lived in California in January, even though it won't come to a vote until November. Proponents argue this is necessary to prevent billionaire flight; opponents point out that alternatively, billionaires could flee before the tax even passes -- as some have already done.
One plausible result is that the tax fails either at the ballot box or the courts, but only after spurring California's richest taxpayers to flee, leading to a net decrease in revenue. Some people propose it could decrease state revenues overall if it drove out enough billionaires, though others disagree.
Pro-tech-industry newsletter Pirate Wires finds that 20 out of 21 California tech billionaires interviewed were "developing an exit plan" and quotes an insider saying "if this tax actually passes, I think the technology industry kind of has to leave the state."
Even Gavin Newsom, hardly known for being an anti-tax conservative, has argued it "makes no sense" and "would be really damaging." Alexander's legal and economic analysis team doubt the direst warnings, but agree the tax is of dubious value and its provisions poorly suited to Silicon Valley.
SEIU's History of Ballot Extortion
On one level, it's no surprise that California, a state full of bad socialists, is considering bad socialist policy. But this is the wrong perspective. This proposition isn't being sponsored by some generic group of Piketty-reading leftists. It's the project of SEIU -- Service Employees International Union -- a union of mostly healthcare workers.
This immediately clarifies whether it's net negative for revenue. 90% of the revenue from the tax is earmarked for health care. So even if it's net negative for the state, it isn't net negative for the health care budget -- specifically, for the people sponsoring the measure.
But the picture gets even more conspiratorial. SEIU is known in California political circles for pioneering and perfecting the art of extortion via ballot initiative. Their usual strategy: propose a ballot initiative that sounds nice to voters, but which is actually deliberately designed to ruin some industry. Demand concessions from that industry in exchange for withdrawing the initiative.
Their first extortion attempt was the 2014 Fair Healthcare Pricing Act, which would have capped the amount hospitals were allowed to charge for procedures at some unsustainable amount. The hospital association seemed to think this was an existential threat: if the initiatives are approved by voters, hospitals could not operate as they do now. It would be necessary for hospitals to restructure their business model and services provided.
The government's mandatory fiscal analysis of the initiative agreed -- "about 20 hospitals would change from having positive operating margins to having operating losses before taking into account any strategies these hospitals might implement in response to the measure."
But help was on the way. SEIU offered to withdraw its initiative in exchange for a $100 million "donation" from hospital lobby groups to one of SEIU's pet causes, plus the right to expand their union into the affected hospitals.
The hospitals caved and gave them what they wanted. The union was surprisingly frank in their celebration: Union leader Dave Regan said that SEIU-UHW had spent $5 million on backing the ballot initiatives, but that it paid off handsomely. "For a $5 million investment, we get an $80 million turn to pursue those things," Regan said.
Buoyed by their success, SEIU identified dialysis clinics as their next target and demanded similar union expansion rights. The dialysis clinics refused, and so began one of the most shameful chapters in California ballot history.
In 2018, SEIU proposed a ballot proposition to cap dialysis clinic revenues at some unsustainable level. The clinics spent $100 million fighting it -- "the most money raised for a campaign like this in California history" -- and it failed.
And then it was back. In 2020, SEIU proposed a new packet of regulations for dialysis clinics, all of which probably sounded reasonable to the average voter but which had the overall effect of making them ruinously expensive to operate. The measures were opposed by the California Medical Association, the American Nursing Association, various patients' groups, and even the NAACP -- Black people are especially prone to kidney disease and would be hardest hit.
Once again, the clinics spent $100 million getting the message out, and the Californian public rejected it.
And then it was back again. In 2022, SEIU proposed basically the same packet of regulations. All the same groups lined up against, now joined by the Renal Physicians Association, the Renal Physician Assistants' Association, the National Kidney Association, and various veterans groups -- older veterans are also commonly affected by kidney disease and would be hard hit.
After wasting another $100 million, the proposition was defeated a third time.
One dialysis proposition might be happenstance, two might be coincidence, but three was enemy action.
Somewhere in this process, Californians started to wonder what was going on. In 2020, media nonprofit CalMatters published "Good Policy Or Ballot Blackmail?" trying to spread awareness of SEIU's extortion attempts. It focuses on SEIU leader Dave Regan's love of the tactic: he sponsored Proposition 23 on the November ballot, which would add new regulations for dialysis clinics. He put a similar measure before voters in 2018, which they rejected.
In the last two elections, Regan also sponsored a measure to tax hospitals in Los Angeles County city Lynwood and to cap prices at Stanford hospitals and clinics in several Bay Area cities. And that doesn't count the many initiatives he began working on by collecting signatures but withdrew before they reached the ballot -- including a minimum wage initiative in 2016, a pair of measures to limit hospital fees and executive pay in 2014, and two other initiatives to curb hospital bills and expand charity care in 2012.
All told, these campaigns have cost the union at least $43 million and resulted in no wins on the ballot in California -- though union president Dave Regan says they've helped make progress in other ways.
The practice has earned Regan a reputation as an aggressive labor leader who uses the initiative process to needle adversaries in the health care profession as he tries to expand membership in his union. "Dave Regan has made this into a strategy," said Ken Jacobs, chair of the UC Berkeley Labor Center.
And on the opinions of other labor leaders: "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 for many years, but now heads the rival National Union of Healthcare Workers.
Regan's frequent use of ballot measures is "dishonest with voters," Rosselli said. "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."
The Wall Street Journal agreed, and even the more liberal Los Angeles Times described SEIU's work as "political extortion."
The Political Angle
Given that all of SEIU's past progressive-sounding legislation has been thinly-disguised extortion attempts, might this one be as well?
The argument against: SEIU is entirely focused on healthcare and doesn't care about the tech industry. The argument in favor: Gavin Newsom cares about the tech industry. And SEIU cares about Gavin 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. And 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.
If everything goes exactly right, Newsom can make it work. Instead, there's this wealth tax coming at the worst possible time. Newsom really, really wants it to go away.
So, he's been meeting with SEIU leader Dave Regan to see what's on offer: "We've been at this for four months," Newsom said in an interview with Politico, describing an "all-hands" effort that has included him 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.
This is a heads-I-win-tails-you-lose gambit by SEIU. If Governor Newsom offers them enough concessions and bribes, they'll drop the initiative. If not, they'll carry it through, maybe win, and get billions of dollars of extra health care spending, some of which will flow to their members.
The Broader Implications
One critique of capitalism argues that although in theory it aligns incentives perfectly so companies should produce things people want, in practice it also incentivizes the hunt for loopholes: addictive products that can take advantage of seemingly tiny wedges between what people will buy and what's good for them. Cigarettes, casinos, payday loans, and social media all demonstrate these wedges collectively form a multi-trillion dollar niche.
In the same way, 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.
A counterargument worth considering: SEIU's healthcare-focused initiatives do contain genuine consumer protection elements. Not everything the union proposes is a negotiating tactic. The dialysis propositions included real regulatory proposals that voters evaluated on their merits -- and rejected three times.
Bottom Line
Alexander's strongest argument is the pattern he uncovers: SEIU has a documented history of extorting industries while masquerading as progressive policy reform. His biggest vulnerability is that the piece reads like conspiracy theory until you see the full extent of their past campaigns -- which he does document methodically. The Silicon Valley wealth tax debate isn't really about taxation at all; it's about whether California voters will continue to let a labor union hold the state's ballot system hostage.