The Service Employees International Union (SEIU) California, one of the state’s most influential labor organizations, announced it will remain neutral on the proposed billionaire wealth tax appearing on the November ballot as Proposition 40. The vote by the union’s executive board marks a significant setback for supporters of the measure and highlights ongoing divisions within California’s progressive labor movement.

Proposition 40 seeks to impose a one-time 5% tax on the assets of billionaires who were residents of California at the start of this year. The revenue generated is earmarked primarily for healthcare funding, with 90% allocated to the sector. SEIU California, representing 750,000 members, noted this allocation but cited concerns echoed by other labor groups—particularly teacher, police, and firefighter unions—that the tax could destabilize the state’s budget and, by extension, threaten funding for education, public safety, and other essential services.

SEIU California is the parent organization of SEIU-United Healthcare Workers West (SEIU-UHW), the union responsible for drafting the billionaire tax proposal and spearheading efforts to qualify it for the ballot. SEIU-UHW President Dave Regan has argued the tax is necessary to offset anticipated state budget cuts exceeding $100 billion in healthcare and food assistance programs. Those cuts stem from the One Big Beautiful Bill Act signed into law last year, which Regan and his supporters say shifted resources to benefit the wealthy at the expense of working Californians.

Press Secretary Renee Saldana for SEIU-UHW emphasized internal polling indicating broad support for the tax among union members, claiming 70% backing. She affirmed confidence that SEIU members, along with other Californians, would vote to protect healthcare funding and maintain hospital and clinic operations.

Tensions surfaced during negotiations last month between Regan and Governor Gavin Newsom. Reports suggested Regan offered to withdraw Proposition 40 if the governor agreed to union contract concessions at several state medical facilities. Regan denied conditioning the tax pullback on any demands, maintaining that the measure is vital to preventing a looming crisis in California’s healthcare system.

Some unions and Democratic allies, including Planned Parenthood Affiliates of California, contend the one-time wealth tax is an inadequate remedy, particularly given the sustained federal political landscape under Republican control. SEIU California expressed a preference for a longer-term approach focused on consistent revenue streams, such as taxing employers who pay wages resulting in worker reliance on public benefits.

Governor Newsom recently signed legislation delaying another labor-backed initiative, the “Fair Share” tax, until the following year when a new governor is expected to assume office.

Concerns also persist among some Democrats and labor groups that Proposition 40 could inadvertently weaken California’s economy. Critics warn that higher taxes on billionaires might prompt wealthy residents to relocate, eroding the state’s tax base. In line with these worries, tech billionaire Sergey Brin moved from California to Nevada last year, and he has donated $82 million to opposition committees resisting the tax.

Governor Newsom has publicly argued for a federal wealth tax to close loopholes that allow the wealthy to evade state taxes by changing residency. In a recent statement, he noted that billionaires often avoid state taxes by moving to other states, framing the issue as requiring federal intervention.

In addition to its neutral stance on Proposition 40, SEIU California announced opposition to Proposition 39, a proposed voter ID measure, and Proposition 43, which would limit the ability of local governments to raise taxes.