Gov. Gavin Newsom failed to broker a last-minute deal to keep California’s controversial billionaire tax off the November ballot, setting up what could become one of the nation’s most expensive and politically explosive ballot fights over taxing the ultra-wealthy to cover federal health care cuts.

“Ironically, Gov. Newsom is in lockstep with [President] Donald Trump and billionaires like Peter Thiel and Sergey Bin on this issue,” Debru Carthan, vice president for SEIU-United Healthcare Workers West, said during a news conference Thursday evening. The labor union leading the charge to impose a one-time 5% tax on residents whose net worth exceeds $1 billion.

“Gov. Newsom has had seven months to put forward a solution to prevent hospital from closing and save patient lives, but he hans’t — because Gov. Newsom has no plan,” Carthan said.

Newsom had vowed to stop the billionaire tax from passing, but the collapse of negotiations involving the governor’s chief of staff, Nathan Barankin, and SEIU-UHW, the health care union led by bare-knuckle political brawler Dave Regan, will now require the governor to expend an incredible amount of political capital. 

The governor’s office did not immediately respond to a request for comment.

Voters will be forced to decide whether California should impose an unprecedented wealth tax, which supporters say is needed to offset looming federal health care cuts as a result of President Trump and Republican’s “Big Beautiful Bill.”

Newsom, business groups like the Chamber of Commerce and the State Building and Construction Trades Council, have warned that the measure could accelerate the flight of billionaires, investors and startups already leaving the Golden State.

Earlier this month, CalChamber issued a statement saying the “unprecedented wealth tax is not only misguided but creates a dangerous precedent that will cause more problems than it would ever solve.”

Newsom refused to back down last week after organizers behind the billionaire tax initiative offered to reduce the proposed tax from 5% to 2%.

California is home to more than 200 billionaires whose combined wealth exceeds $2 trillion. Supporters argue even a small slice of that wealth could preserve Medi-Cal, hospitals, food assistance and education programs facing financial pressure. 

Opponents counter that the state risks permanently driving away the very taxpayers responsible for a disproportionate share of California’s income tax revenue.

Google co-founder Larry Page, Palantir co-founder Peter Thiel, Amazon founder Jeff Bezos and Oracle founder Larry Ellison have all reportedly established ties elsewhere in recent years, while Google co-founder Sergey Brin, SpaceX investor Steve Jurvetson and AI executive Naveen Rao have relocated to Nevada’s Lake Tahoe region. 

Former Hewlett-Packard and eBay CEO Meg Whitman also recently sold her sprawling Northern California ranch amid the growing debate over the proposed wealth tax.

The prospect of another wave of departures has fueled an aggressive counteroffensive from Brin and other wealthy Californians. Through Building A Better California, the group has poured tens of millions of dollars into competing ballot initiatives designed to blunt or potentially neutralize the billionaire tax if voters approve it.

One of those measures, which also qualified for the November ballot, would require new audits of programs funded through new state special taxes and includes provisions critics say could create legal hurdles for implementing the billionaire tax. Political observers say the strategy effectively gives opponents multiple paths to stop the measure, even if voters initially approve it.

The billionaire tax itself is the brainchild of SEIU-UHW’s president, Regan, who has built a reputation for using statewide ballot initiatives to force negotiations with elected officials.

Chris Hannan, president of the State Building and Construction Trades Council, publicly broke with fellow labor leaders this month, warning that a retroactive wealth tax could discourage billionaires from financing major developments that employ thousands of union workers.

“It’s not because we feel that anyone shouldn’t have to pay their fair share, but doing a retroactive tax, we believe, would drive people out of the state and drive investment out of the state,” Hannan told Politico.

Supporters contend the billionaire tax asks only a tiny number of the state’s wealthiest residents to shoulder the burden rather than forcing cuts to hospitals, clinics and health coverage for millions of Californians.

Newsom has argued a California-only wealth tax would be difficult to enforce, vulnerable to constitutional challenges and ultimately cost the state more revenue than it generates if billionaires relocate.

“The governor supports making the wealthiest Americans pay their fair share, but this poorly designed state-only measure will defund teachers, schools, clinics, and public safety,” his office previously said.

“This will be defeated — there’s no question in my mind,” Newsom told The New York Times in January. “I’ll do what I have to do to protect the state.”