Newsom Scores Political Victory After California Rejects Billionaire Wealth Tax, but Democratic Divide Remains

California Gov. Gavin Newsom may have won an important political battle after voters rejected a proposed billionaire wealth tax, but the outcome is creating new tensions within the Democratic Party as the governor looks toward a possible 2028 presidential campaign.

Proposition 40 would have imposed a one-time 5% tax on the net worth of California residents worth more than $1 billion. Supporters argued the money was needed to help offset federal healthcare funding cuts and protect programs serving low-income Californians.

But Newsom opposed the measure, warning that billionaires could move out of California, potentially taking jobs, businesses and significant tax revenue with them.

California voters ultimately rejected the proposal, with approximately 52.8% voting against it and 47.2% supporting it, according to election results reported by The Associated Press.

The outcome was a setback for progressive leaders, including Vermont Sen. Bernie Sanders and California Rep. Ro Khanna, who supported the tax.

Khanna sharply criticized Newsom following the defeat, accusing the governor of siding with wealthy donors instead of working families and organized labor.

"The reason we didn't win is because of Newsom," Khanna told CNN.

The disagreement could become an issue in the Democratic Party's broader debate over economic policy and leadership ahead of the 2028 presidential election. Khanna has also been weighing a potential White House campaign.

Newsom's opposition to the measure was based largely on concerns about the economic consequences of imposing a wealth tax at the state level. He has argued that a national approach to taxing billionaires would be more effective and avoid encouraging wealthy residents to relocate.

The proposal would have applied to approximately 250 California billionaires and was expected by its supporters to generate as much as $100 billion over five years. Most of the proposed revenue was intended for healthcare, with additional funding designated for education and food assistance.

Opponents, including Google co-founder Sergey Brin, argued the tax could drive wealthy investors and business leaders out of California.

Brin became the largest financial backer of the opposition campaign, contributing approximately $132 million. Other prominent technology and business figures also contributed millions to efforts opposing the proposal.

Campaign spending was heavily weighted toward opponents. According to figures cited in the CNN report, opponents significantly outspent supporters on television, digital and radio advertising.

The result has left Democrats confronting competing priorities: raising revenue to protect public services while maintaining California's economic competitiveness and its relationship with the technology industry.

For Newsom, the defeat provides political support for his argument that a state-level wealth tax could create economic risks. But criticism from progressive Democrats suggests the issue is unlikely to disappear.

Supporters of the proposal have already indicated they could return with another effort, potentially making the taxation of billionaires a continuing issue in California and national politics.