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Sacramento created California’s budget problem — billionaire tax won’t fix it

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Proponents of California’s proposed Billionaire Tax Act have a story to tell: President Donald Trump and the Washington Republicans cut health care, and so the “billionaire tax” is the necessary response.

Then there’s the reality, which we describe in a new paper from the Hoover Institution.

Our analysis looks at what Trump’s “One Big, Beautiful Bill” actually does to Medi-Cal, and whether the proposed first-in-the-nation wealth tax would address it.

Spoiler alert: The answer to the second question is no, and the reasons start with Sacramento, not Washington.

Start with the fact that the state of California does not have a revenue problem; it has a spending problem.

State tax revenue is up 55 percent since 2019, but spending is up more — 68 percent over that same period.

Newsom’s own January 2026 budget forecast projected a $93 billion shortfall over the next four years. This is a hole that was dug entirely by Sacramento Democrats, not Washington Republicans. 

The driver of this crisis is Medi-Cal, California’s Medicaid program.

Since 2011, total program expenditures have nearly tripled, to about $185 billion a year, and Medi-Cal’s claim on the general fund has grown from 14 to 20 percent.

Have Medi-Cal services or quality increased nearly........

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