California Federation of Labor Unions President Lorena Gonzalez says Proposition (Prop) 40 would provide temporary funding to protect Medi-Cal, hospitals and health care jobs from federal cuts.
Opponents warn the tax could weaken California’s finances.
Prop 40, which is on the Nov. 3 ballot, would impose a one-time 5% tax on billionaires who were California residents on Jan. 1, 2026. Real estate and retirement accounts generally would be excluded.
The measure directs 90% of the revenue to health care. The rest would go to education, food assistance and administration. The money would be exempt from constitutional rules governing school funding and the state’s spending limit.
The nonpartisan Legislative Analyst’s Office (LAO) estimates the tax would raise tens of billions of dollars over several years. It says changes in billionaire behavior, including leaving California, could reduce state income tax collections by less than $1 billion a year.
Gonzalez, who represented the 80th District in the State Assembly from 2013 to 2022, said Prop 40 is needed because the federal tax-and-spending law signed by President Donald Trump reduced projected federal Medicaid spending while extending tax cuts. Medicaid is known as Medi-Cal in California.
Gonzalez said Medi-Cal is especially important in Black and Latino communities because it covers many children and families. Some union members also rely on the program.
“If we need to have a bridge to fund Medi-Cal while this president is in office, it makes sense to tax the billionaires,” Gonzalez told California Black Media (CBM).
The money could prevent cuts to Medi-Cal and help keep hospitals and community clinics open, she said.
Gonzalez also linked health care funding to jobs. Cuts to hospitals and clinics would affect patients and employees, including Black and Latino workers in health care support positions. She pointed to Martin Luther King Jr. Community Hospital in Los Angeles, which serves predominantly Black and Latino communities, as a safety-net hospital already under financial pressure.
The federation, representing more than 1,300 unions and 2.3 million workers, overwhelmingly endorsed Prop 40 in August. SEIU-United Healthcare Workers West sponsors the measure. Other supporters include U.S. Sen. Bernie Sanders (I-Vt.) and U.S. Rep. Ro Khanna (D-CA-17).
Gov. Gavin Newsom says he will vote no, arguing that a California-only tax could drive billionaires, businesses and tax revenue elsewhere. He also objects to directing nearly all the money to health care.
Newsom instead supports a national approach. He called for “a true minimum tax on billionaires — a modern Buffett Rule — that ensures the people at the very top pay at least the tax rate their own workers pay.”
Democratic gubernatorial candidate Xavier Becerra and Republican candidate Steve Hilton also oppose Prop 40. The California Teachers Association said the measure would not provide sustainable, long-term funding for schools and communities.
Several health care groups agree federal Medicaid cuts threaten Medi-Cal but say Prop 40 is the wrong answer. Planned Parenthood Affiliates of California President and CEO Jodi Hicks said the measure’s uncertain effect on the budget and lack of detail about health care spending “will do more harm than good in the long term.”
California Primary Care Association President and CEO Francisco Silva said Prop 40 could “decimate the very safety-net and workforce that Medi-Cal patients rely on.” The California Hospital Association said the tax would provide only temporary funding and threaten the state’s long-term finances. It also said the measure would create more uncertainty for hospitals already at risk of closing.
Rick L. Callender, president of the NAACP California/Hawaii State Conference, said the measure would “make many of our problems worse” by putting pressure on the budget and squeezing other public services.
Gonzalez replied, “I don’t know how that’s possible,” arguing that federal health care cuts, not Prop 40, would strain the budget.
Gonzalez said opponents have not identified another way to replace lost health care funding. ‘This is a solution, and I think it’s highly irresponsible to oppose this tax when there’s been nothing else laid on the table,” she said.
The California Medical Association supports a permanent extension of the state’s existing tax on high-income earners to fund Medi-Cal and education. It says Prop 40 could make that proposal harder to pass.
Opponents also cite a Hoover Institution study that says six billionaires publicly left California before Jan. 1, removing $536 billionfrom the proposed tax base. Gonzalez called Hoover a right-wing think tank that sides with billionaires and rejected its projections.
United Domestic Workers and unions representing electrical workers, laborers, carpenters and operating engineers also oppose the measure.
Although the federation endorsed Becerra for governor, Gonzalez said labor does not expect to agree with a candidate on every issue. “At the end of the day, our loyalty is to working people,” she said. “We will take that over any politician any day.”
Prop 40 needs a majority to pass. However, Prop 40 could be blocked even if it passes. If Proposition 41 or 42 also passes with more “yes” votes, and a court determines that the measures conflict, the conflicting measure with the higher vote total would prevail.
If voters reject Prop 40, Gonzalez said labor would continue seeking money for health care. One option is an assessment on companies whose workers rely heavily on Medi-Cal. Labor could also “take another shot at the billionaires,” she said.
“I’m a labor leader,” Gonzalez said. “I’m going to fight for more funding somewhere.”
