Newsom Calls for National Billionaire Tax While Opposing California's Version, and Khanna Calls Him a Fraud

Since our prior coverage of the California Billionaire Tax Act's path to the November ballot, the Democratic fight over how to tax the ultra-wealthy has broken into an open 2028 presidential proxy war between two California Democrats.

What Newsom Actually Proposed

On Friday, June 27, Newsom published an essay on Substack laying out a federal economic agenda. The core: a national minimum tax on billionaires, structured as what he called "a modern Buffett Rule," requiring the wealthiest Americans to pay at least the effective tax rate their own workers pay. He cited a system of loopholes that, in his words, allowed "the office worker" to shoulder a higher rate than "the heiress."

Newsom also called for closing what he termed the "lifestyle loan loophole," the practice by which billionaires borrow against appreciated stock holdings, report no taxable income, and then pass those assets to heirs untaxed. He wants inheritance rules rewritten ahead of what he described as a $124 trillion generational wealth transfer over the next two decades.

He additionally called for returning corporate tax rates to pre-2017 levels, closing offshore loopholes, and creating a "national public equity fund" giving every American a stake in AI company gains, with proceeds directed toward job retraining and enhanced unemployment benefits.

ZeroHedge reported that an earlier version of the Substack post specified the tax would apply to anyone with a net worth of at least $100 million, not just "billionaires." That language was scrubbed after publication. CBS News reported the version without the $100 million threshold. Newsom's office has not publicly addressed the edit.

Why He Said No to California's Version

One day before the Substack essay, the union-backed California Billionaire Tax Act officially qualified for the November ballot, according to CBS News. The measure, backed by SEIU-United Healthcare Workers West and its president Dave Regan, would impose a one-time 5% tax on California billionaires' wealth, with 90% of revenues earmarked for state Medicaid spending.

Newsom says he will vote against it. His stated reasons: billionaires can simply relocate to avoid a state-level tax, federal action is the only durable solution, and the measure directs nearly all revenue to healthcare while ignoring public schools, housing, women's health clinics, and child care. He argued the Legislature, not a single advocacy organization, should control California's budget priorities.

The Sacramento Bee reported that Newsom had quietly tried to negotiate the measure off the ballot before Thursday's deadline, personally telling a wealthy donor he expected to broker a deal. Those talks failed.

Some of California's biggest names appear to be taking the relocation risk seriously regardless. The Los Angeles Times reported that Mark Zuckerberg, Larry Page, and Sergey Brin have been purchasing homes in Florida, a state with no income tax.

Khanna's Counterattack

Rep. Ro Khanna, D-Fremont, did not wait long. In a hastily called virtual press conference Friday, he accused Newsom of providing cover to the billionaire class at the exact moment three million Californians face healthcare cuts from the Republican budget bill signed by President Trump.

"It's a gulf of difference between me and the governor," Khanna said, "and it's the difference between standing up for three million Californians who are losing healthcare, or standing for the billionaire class."

Khanna and Sen. Bernie Sanders, D-Vermont, introduced their own legislation in March: a 5% annual wealth tax on U.S. billionaires, with revenues funding $3,000 direct payments to households earning $150,000 or less. Khanna's argument is that Newsom's "lifestyle loan" focus raises a fraction of what a true wealth tax would generate, arrives too late to matter for people losing coverage now, and deliberately avoids the hard political fight.

State-Level Wealth Tax Concerns

State-level wealth taxes have a real enforcement problem. Billionaires are mobile. California has already watched high earners accelerate moves to Texas, Nevada, and Florida over the past several years. A ballot measure that triggers further capital flight while locking 90% of revenues into a single budget line could leave the state worse off fiscally. The California Teachers Association and other traditional liberal allies have lined up against the SEIU measure, not just Newsom. That coalition suggests the opposition is not reducible to donor capture.

Newsom's federal-first argument is coherent on the merits. The dispute is not whether he is right, but whether his federal proposal has any path in the current Congress, and whether he is genuinely committed to it or using it as political cover.

Presidential Politics and Credibility

Both Newsom and Khanna are widely discussed as potential 2028 Democratic presidential candidates. Khanna is staking out the Sanders lane: immediate, large-scale redistribution. Newsom is pitching a more federalist framing, but his credibility depends on whether his national proposal is more than a positioning document.

The specific unresolved question: Newsom's Substack edit, removing the $100 million net-worth threshold and narrowing the proposal to "billionaires," happened after publication and without public explanation. Whether that change reflects a genuine policy recalibration or a reaction to blowback from donors in his network is something his office has not addressed.