The endorsement represents a major rebuke to Newsom and Democratic gubernatorial nominee Xavier Becerra, both of whom have opposed the billionaire tax.
For Newsom, the timing could hardly be worse.
The governor has already endured a string of controversies and political headaches in recent weeks.
Last week, a woman publicly discussed a previous extramarital affair involving Newsom nearly two decades ago, forcing the governor to address a personal controversy that had remained largely in the background.
At the same time, Newsom and First Partner Jennifer Siebel Newsom have faced increased scrutiny surrounding the governor’s extensive use of “behested payments,” as federal investigations involving the couple continue to generate political attention.
Now the governor is confronting a different kind of threat—an open rebellion from California Democrats over economic policy.
Newsom has warned for months that California should not impose its own wealth tax. His argument is straightforward: billionaires are not trapped inside the state.
If California makes itself dramatically more expensive for the wealthiest residents, Newsom has argued, those individuals can simply move elsewhere—and potentially take investments, businesses, jobs and charitable giving with them.
The governor has instead favored a federal wealth tax.
That approach, he has argued, would prevent wealthy Americans from escaping the policy merely by changing their state of residence.
Becerra has taken essentially the same position.
On Friday, just before the party’s endorsement fight, Becerra announced his positions on several November ballot measures. He supported Proposition 3, which would extend an existing tax on high-income Californians to finance education.
But when it came to Proposition 40, Becerra declined to get behind it.
Party activists ultimately went in the opposite direction.
The result exposed an increasingly obvious divide between California’s Democratic establishment and its more aggressive progressive wing.
This is not a traditional partisan fight.
Democrats dominate California’s political machinery, controlling the governor’s office and both chambers of the Legislature.
The battle over Proposition 40 is therefore a fight over what the Democratic Party itself should become.
Should California pursue increasingly aggressive taxes on wealthy residents?
Or should Democrats listen to warnings that the state’s enormous tax burden could eventually drive away the very people providing a substantial portion of its revenue?
Proposition 40’s campaign is being driven by Dave Regan, president of SEIU United Healthcare Workers West.
Supporters say the measure is necessary because of reductions in federal healthcare funding under President Donald Trump’s administration. They argue California needs a massive new source of money to protect healthcare services.
The campaign estimates the tax could bring in roughly $100 billion.
That number is enormous.
Supporters have attracted backing from prominent progressive figures, including Sen. Bernie Sanders and Rep. Ro Khanna, along with several labor organizations.
But the proposal has also produced an unusual coalition of opponents.
The California State Council of Laborers has opposed it. The California Police Chiefs Association has also come out against the measure.
Perhaps more revealing, SEIU California’s statewide executive board has chosen to remain neutral despite the involvement of SEIU United Healthcare Workers West in the campaign.
The California Federation of Labor Unions is also expected to weigh in, adding another potentially important layer to the fight.
The underlying policy is straightforward but financially dramatic.
Proposition 40 would impose a one-time 5 percent tax on the net worth of billionaires who met the measure’s residency requirements. Under the official state analysis, the tax would apply to billionaires who were California residents on January 1, 2026, with payment due in 2027 and an option to spread payments over five years.
Supporters see that as a historic opportunity to make the richest Californians shoulder a larger share of the state’s financial burden.
Critics see it as a dangerous experiment.
California already has one of the highest income-tax burdens in the country. Adding a massive one-time wealth levy could give wealthy residents another reason to reconsider where they live and where they keep their money.
That is the heart of Newsom’s objection.
A billionaire does not necessarily have to sell everything and disappear to avoid California’s tax structure. A change in residency can potentially move enormous amounts of wealth beyond the reach of Sacramento.
Opponents therefore argue that the state could collect a giant windfall on paper while weakening its long-term tax base.
And California has plenty at stake.
The state depends heavily on high-income taxpayers, whose earnings and capital gains can produce huge amounts of revenue during strong economic years and sharply reduce state income during downturns.
Critics fear Proposition 40 could make that volatility even worse.
Newsom’s federal alternative attempts to solve that problem by eliminating the ability of wealthy Americans to escape the tax simply by crossing a state line.
But there is an obvious obstacle.
A nationwide wealth tax would require action from Congress.
That makes Newsom’s preferred approach considerably more difficult to implement, especially in the current political environment.
For now, California Democrats have chosen a different path.
They have placed the billionaire tax squarely at the center of the November election.
And in doing so, they have delivered Newsom a political message that may be impossible to ignore: California’s Democratic base is willing to push further left on taxes than its own governor—or even the party’s nominee to replace him.
The governor spent months warning that Proposition 40 could hurt California.
His party just decided to endorse it.
That is more than a disagreement over a ballot measure.
It is a warning sign that the ideological center of California’s Democratic Party may be shifting beneath Newsom’s feet.
