A proposed wealth tax on California’s billionaires is intensifying debate within the state’s political and healthcare sectors, injecting uncertainty into efforts to secure funding amid looming budget cuts. Known as Proposition 40, the measure would impose a one-time 5% levy on household net worth exceeding $1 billion, with the proceeds largely directed toward shoring up public healthcare programs.

The initiative has fractured California’s Democratic coalition, drawing support from unions representing healthcare workers but facing opposition from major hospital and physician groups. Advocates assert the tax is crucial to offset anticipated reductions in federal and state healthcare funding, while critics argue it risks destabilizing the healthcare system and presents an untested taxation model with uncertain legal and fiscal outcomes.

SEIU-UHW, the healthcare workers union sponsoring the measure, emphasizes the urgent need for revenue to sustain expanded healthcare access gained over the past decade. California’s Medi-Cal program and other forms of insurance saw enrollment surge following eligibility expansions, reducing the uninsured population from about 6.5 million in 2011 to 2.4 million in 2024. However, under recent federal policy changes and proposed budget adjustments, California is expected to lose approximately $30 billion annually in federal Medi-Cal funding. These cuts, combined with more stringent work and eligibility requirements, are projected to nearly double the state’s uninsured population under age 65 to 4.6 million by 2030, according to the UC Berkeley Labor Center.

Dave Regan, president of SEIU-UHW, warned that millions losing coverage will result in preventable deaths due to forgone treatment. The union estimates the tax could generate $100 billion over five years, with the majority earmarked for healthcare preservation. Regan dismissed alternative financing options as politically unfeasible and contended that taxing ordinary residents more heavily is the likely fallback.

Opponents, including California Medical Association CEO Dustin Corcoran, caution that the one-time billionaire tax is an experimental approach that could jeopardize healthcare funding. Hospital groups and doctors argue the measure distracts from other more sustainable funding strategies and point to possible negative economic effects, such as wealthy individuals relocating out of state, which could reduce long-term tax revenues. The state’s Legislative Analyst’s Office projects that while the tax may raise tens of billions, it could also decrease income tax collections over time due to migration.

The measure has sparked a costly campaign, with wealthy donors like Sergey Brin funding the opposition group Building a Better California, which has spent nearly $230 million on advertising. Additionally, two competing ballot propositions seek to invalidate or limit Proposition 40’s effects if passed.

Several hospitals are bracing for tighter budgets regardless of the tax’s fate. Martin Luther King Jr. Community Hospital in South Los Angeles, which operates well beyond its original capacity, has already endured strained conditions and considers further funding cuts a threat to its viability. Ridgecrest Regional Hospital’s CEO, James Suver, said the facility is weighing service reductions, including pausing maternity care and scaling back emergency-room coverage, if funding gaps persist.

While legal challenges are expected if Proposition 40 passes, proponents remain optimistic that court proceedings can be resolved within a year. Critics argue that alternative measures, such as mandating corporate contributions toward public insurance costs, may offer more immediate and stable relief, though union leaders reject those proposals as disproportionately burdensome on low-wage workers.

As California voters prepare to decide on Proposition 40 in the November election, the contest underscores the broader fiscal and policy challenges facing the state’s healthcare system amid shifting federal funding and political divisions.