In a heated political showdown, California Governor Gavin Newsom and Congressman Ro Khanna find themselves on opposing sides of a contentious issue: a proposed billionaire tax in California. This debate is not just about state politics; it’s a microcosm of a larger ideological struggle within the Democratic Party as it looks ahead to the 2028 presidential election.
The proposed tax, which would impose a one-time 5% tax on the state’s approximately 250 billionaires has qualified for the November ballot. Newsom opposes the measure, while Khanna is one of its most vocal supporters. This rift has exposed a significant divide between the party’s populist wing and its moderate establishment.
Newsom’s national vision vs. Khanna’s state-level approach
Newsom has argued that the state-level tax is too narrow, as it would primarily fund healthcare while leaving out other critical areas like schools, housing, and childcare. He also contends that billionaires could simply move to jurisdictions with lower taxes, making a state-level tax ineffective. Instead, he advocates for a national billionaires’ tax.
In an essay published on Friday, Newsom proposed a federal minimum tax ensuring billionaires pay at least the same rate as their workers. He also called for an end to the tax-free lifestyle loan that allows the wealthy to borrow against stock to avoid taxable income and a rewrite of inheritance rules to prevent a permanent American aristocracy. Additionally, he suggested returning to pre-2017 corporate rates, closing offshore loopholes, and creating a national fund to give every American a stake in the wealth generated by artificial intelligence.
Khanna, however, disputes the effectiveness of Newsom’s proposal. He argues that a 5% federal wealth tax would raise around $4 trillion over a decade while Newsom’s approach would bring in roughly $100 billion—about one-fortieth as much. Khanna accuses Newsom of hypothetically supporting policies on a national level while ducking the fight in his own state.
The political stakes and implications
This debate is not just about taxation; it’s about the soul of the Democratic Party. Khanna has framed the issue as a defining moment for the party, asking whether it will cater to the donor class or stand up for the working class. He argues that voters, especially those under 45, are fed up with the concentration of wealth and are looking for fundamental change.
Newsom’s proposal has been met with skepticism from some quarters. Khanna has accused the governor of trying to inoculate himself against charges of siding with the ultra-rich. He also suggests that Newsom is the face and cheerleader for billionaires like Garry Tan and Sergey Brin who have funded efforts to defeat the tax proposal.
The opposition to the state billionaire tax is well-funded. Two counter-measures on the November ballot are designed to cancel the proposition if it passes. One would ban retroactive taxes and new taxes on personal property, and the other targets a provision that exempts the tax’s revenue from a state education-funding rule. The counter-measures are the work of Building a Better California a committee funded largely by billionaires, including Brin, who has contributed about $82 million.
The broader coalition and future implications
The measure has also drawn opposition from an unlikely coalition of labor, medical, and housing groups, including the California Teachers Association the California Medical AssociationPlanned Parenthood Affiliates of California and California YIMBY. These groups consider the tax poorly designed, further complicating the political landscape.
Both Newsom and Khanna are widely expected to run for president in 2028. When asked about the rift between them, Khanna emphasized the gulf of difference between their positions, framing it as a choice between standing up for 3 million Californians losing healthcare or siding with the billionaire class. This debate is likely to continue shaping the Democratic Party’s agenda in the lead-up to the next presidential election.
