Newsom under pressure to raise Medi-Cal taxes Struggle over how to pay for Medi-Cal puts pressure on Newsom to raise taxes

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California health activists, unions and progressive lawmakers have called on the governor and the Legislature to find new money to fund health care and other social services for millions of low-income and disabled Californians.

Their coalition, known as Fight for Our Health, demanded on the steps of the Capitol Wednesday that the Legislature and outgoing Gov. Gavin Newsom take action to offset the funding cuts President Donald Trump and Republicans approved last year.

The dilemma of how to respond to billions of dollars in cuts to social services — in particular to the budget of Medi-Cal, the state’s nearly $200 billion Medicaid program foreshadows a showdown that will dominate both the 2026 legislative session and midterm elections.

While a union is pushing a controversial property tax bill to offset the cuts, progressive Democrats in the Legislature are proposing a standalone corporate tax, though details are scarce. If it materializes into a bill, it is also likely to split the party, which is sensitive to accusations that Californians pay excessive taxes and which recently announced that its leaders would focus on cutting costs for the state’s residents.

In his final year as governor, Newsom faces a battle between two politically expensive options: raising taxes or cutting benefits for millions of low-income and disabled Californians. Although his administration has only tried to blame Trump for the federal cuts, health care advocates have made it clear they will pressure Newsom to help prevent a drastic loss of coverage.

“I want to address the governor and the state legislature,” Judy Mark, president of Disability Voices, said from the Capitol steps. “We know you were not responsible for these terrible cuts, but now the responsibility falls into your hands. You have the power to protect us.”

The governor angered health care activists by not including funds to offset the cuts to him proposal for the state budget which acknowledges that tens of thousands of people will lose coverage and considers fewer services among the projected savings. This year, the state began freezing new Medi-Cal enrollment for undocumented immigrant adults because of rising costs for the program, despite objections from progressives and activists.

Newsom analysts project that about 522,000 Californians will lose their Medi-Cal coverage in the 2026-2027 fiscal year, a number that will grow to 1.8 million in the future. His administration has argued that the state simply does not have the funds to provide coverage for those excluded from the program due to new federal laws.

One union, the Service Employees International Union – United Health Workers of the West, proposed a bill that will impose a wealth tax to California billionaires to help cover the roughly $30 billion the state would lose annually because of Trump’s tax-and-spend law. Organizers say the flat 5 percent tax would generate about $100 billion for the state’s health care system. Approximately 10% of the funds raised will be reserved for public schools.

But Newsom opposes the measure, which has not yet been approved for a vote but has already sparked concern in Sacramento and Silicon Valley.

Billionaires are crucial to the state budget

The proposal sparked a wave of opposition. Google founders Larry Page and Sergey Brin are said to have tried to move some business units out of California as other companies threaten to leave. Democratic strategists close to Newsom are organizing a campaign committee to reject the measure as the union collects the nearly 900,000 signatures needed to get on the November ballot.

Newsom, who has repeatedly opposed state estate tax proposals, he told Politico this week who had personally pressured the measure’s sponsors to drop it, out of concern that it might cause tax millionaires to leave California. In addition, the governor maintains long-standing personal relationships with many of the tech giants likely to be targeted by the wealth tax proposal, and he has reasons to keep them close: They are potential donors if he runs for president after he ends his term as governor this year.

Although progressives have pressured Newsom to raise revenue and support Medi-Cal, few have supported the property tax proposal, and most remain wait-and-see. They also did not criticize Newsom’s opposition, a possible sign that liberal lawmakers hope he will be willing to seek other health care funding.

Newsom spokeswoman Izzy Garden declined to comment on whether the governor would consider alternative tax proposals.

Health advocates said replacing federal funding will be a key priority this legislative session. Progressive lawmakers who led opposition to Newsom’s spending cuts proposal freezing Medi-Cal for undocumented immigrants have indicated that they will join the fight as well.

The Chairman of the Health Committee of the Assembly, Oh my god D-Oakland, suggested the state consider imposing new taxes on corporations that hire workers who are paid so little that they qualify for public health assistance.

“We cannot allow these corporations to continue to profit,” he said. “California has a responsibility to act decisively, and we will.”

But he hasn’t introduced any bills, and health care advocates say they still hope to have more options on the table.