In San Francisco, Newsom opposes a proposed multimillion-dollar tax, vowing to protect homeless Californians

SAN FRANCISCO – As California faces deep budget uncertainty and a widening economic divide, Gov. Gavin Newsom on Friday vowed to protect citizens at both ends of the spectrum — from wealthy business leaders he fears could leave the country to homeless Californians who rely on government-subsidized services.

That balancing act came as Newsom stepped up his criticism of a proposed ballot measure for a multibillion-dollar tax, a move that opponents say could push tech companies and other businesses out of the state and hurt California’s economy.

“It’s already had a big impact on the government,” Newsom said, speaking to reporters in San Francisco’s Mission District.

Newsom is trying to repeal a union plan on the November ballot that would impose a one-time tax on billions. If approved by voters, it would raise $100 billion by imposing a one-time wealth tax of 5% on wealth.

The Service Employees International Union-United Healthcare Workers West, the union behind the proposal, wants to increase funding to help millions of Californians affected by the Trump administration’s sweeping health care cuts.

California’s political leaders, facing a difficult budget year, warn that the state does not have the financial strength to restore those cuts.

Newsom, who has been working behind the scenes with SEIU-UHW in an effort to stop the vote, on Friday appeared skeptical that a deal could be reached with supporters of the measure.

“I don’t know what constitutes a compromise,” Newsom said, calling the move “poorly planned” and saying the money raised would not be distributed to other groups.

“It doesn’t support our public teachers. It doesn’t support our teachers and our counselors, our librarians. It doesn’t support our first responders and firefighters. It doesn’t support the general fund and parks.”

Two of Newsom’s top advisers, Dan Newman and Brian Brokaw, are raising money and forming a committee to oppose the measure.

The proposed billionaire tax divides political leaders in California and across the country, both Rep. Ro Khanna (D-Fremont) and Sen. Bernie Sanders (Vermont) supports the tax.

“It’s a matter of values,” Khanna told X. “We believe that billionaires can pay less wealth tax so working Californians have Medicaid.”

Currently, some prominent businessmen are taking steps that appear to be part of a potential tax avoidance strategy.

On December 31, PayPal founder Peter Thiel announced that his company had opened a new office in Miami, the same day that financier David Sacks said he was opening an office in Austin.

Suzanne Jimenez, executive director of SEIU-United Healthcare Workers West, called it a myth that billionaires are leaving the state and criticized Newsom.

“Right now, his priority seems to be protecting the 200 richest people,” he said. “Healthcare professionals are focused on protecting emergency room access and life-saving care for all 39 million Californians.”

The proposed tax has also reverberated throughout Silicon Valley and the Bay Area, home to some of the world’s richest technology companies and successful venture capitalists.

Newsom was in San Francisco on Friday, where he has served two terms as mayor, to address a different, pressing concern for Californians on the other side of the economy — those who are poor and on the city’s streets.

Newsom, who is weighing a 2028 presidential run, spoke at Friendship House, a treatment company, where the governor said California is changing the state’s state of homelessness.

He pointed to the recent 9% nationwide drop in homelessness as evidence that years of government investment and policy changes are beginning to show results.

That was the first such decline in more than 15 years on a politically vulnerable issue for the two-term governor. California still accounts for nearly a quarter of the nation’s homeless population, according to the Public Policy Institute of California.

Newsom said Friday that the decline reflects years of increased state investment in shelters, housing and behavioral health care, combined with stronger expectations for local governments that receive federal funds. He said the government’s efforts are contrary to what is happening in other areas, pointing to the housing shortage that continues to rise nationally.

The governor’s budget proposal, released on January 9, includes $500 million for the California Homeless Housing, Assistance and Prevention program, which provides grants to cities, counties and continuing care facilities to prevent and reduce homelessness.

That money is paired with investments from Proposition 1, the 2024 ballot measure supported by Newsom and approved by voters. The measure authorized billions in federal bonds to expand mental health treatment capacity and housing for people with serious health needs.

After Newsom’s budget proposal, legislators, housing advocates and local officials said the funding falls short of the scale of the problem.

That concern comes in the face of a troubled budget, with the governor’s finance director warning that even as AI-related tax revenue increases, rising costs and state cuts are expected to leave the state with an estimated $3 billion in debt next year.

The nonpartisan Legislative Analyst’s Office said Newsom’s plan leaves California financially exposed, noting that the administration’s high revenue estimates do not include the risk of a stock market correction that could further worsen the state’s budget outlook.

The analyst’s office said those risks are compounded by multi-year deficits estimated at $20 billion to $35 billion annually, underscoring what it calls growing structural imbalances.

Newsom on Friday called the LAO’s projections about the budget very bad, but said the office is “absolutely right about the structural problems in the state.”

Newsom’s budget does not include significant funding to offset federal cuts to Medicaid and other welfare programs under President Trump and the Republican-led Congress, cuts that local officials warn could have far-reaching consequences for local governments and low-income residents.

Faced with those broader issues, the governor defended his budget and suggested the spending plan would change in May, when the state’s financial situation becomes clearer.

Times staff writer Seema Mehta and Caroline Petrow-Cohen contributed to this report.