Sam Bankman-Fried Backed Income Tax Hike To Appear On California’s 2024 Ballot

California voters handily rejected Proposition 30, a 2022 ballot measure that would’ve raised the state’s top income tax rate, already the highest in the nation, beyond 15%. Yet even though more than 57% of Golden State voters rejected that income tax hike, they will be asked to consider a similar measure in less than two years.

That’s because another ballot initiative to raise California’s top marginal income tax rate has already qualified for the 2024 general election ballot. That ballot measure, officially titled the California Pandemic Early Detection and Prevention Initiative (referred to here as the Pandemic Prevention Tax), would impose a new 14.05% top marginal state income tax rate, up from 13.3%, on earnings above $5 million. That new top rate would remain in effect for 10 years.

Qualifying a measure for the statewide ballot in the nation’s most populous state is a costly undertaking and the Pandemic Prevention Tax (PPT) accomplished that feat with financial backing from Guarding Against Pandemics (GAP), a non-profit advocacy organization founded and, until weeks ago, led by Gabe Bankman-Fried, the brother of former FTX CEO Sam Bankman-Fried. Gabe Bankman-Fried stepped down as director of GAP on November 14, three days after FTX filed for bankruptcy.

In April, the Los Angeles Times reported that Gabe Bankman-Fried “raised $12 million from a cryptocurrency trading firm founded by his brother, Sam Bankman-Fried” to help get the income tax hike on the ballot. Of the $18.5 million in contributions to the campaign in favor of the PPT, that $12 million accounted for 64% of the total contributions. The amount GAP spent to get the PPT on the California ballot dwarfs its federal lobbying expenditures, but not Sam Bankman-Fried’s political donations.

The income tax hike Californians will vote on in 2024 is not the first tax hike campaign backed by the organization partly funded by Bankman-Fried. In 2021, GAP spent nearly half a million dollars seeking to pass a ballot measure that would’ve raised Denver’s local cannabis excise tax by 27%, taking it from 5.5% to 7.0%. That tax hike was defeated in November 2021, with more than 60% of Denver voters rejecting the measure.

“Guarding Against Pandemics spent more than $1 million on lobbying Capitol Hill and the White House over the past year, hired at least 26 lobbyists to advocate for a still-pending bipartisan pandemic plan in Congress and other issues, and ran advertisements backing legislation that included pandemic-preparedness funding,” The Washington Post reported on November 16. “Protect Our Future, a political action committee backed by the Bankman-Fried brothers, spent about $28 million this congressional cycle on Democratic candidates ‘who will be champions for pandemic prevention,’ according to the group’s webpage.”

The PPT has already received endorsements from prominent California politicians, including U.S. Senator Alex Padilla (D) and state Senator Richard Pan (D), chairman of the California Senate Health Committee. This author reached out to both lawmakers to ask whether the realization that the PPT was potentially backed in part with the former FTX CEO’s ill-gotten gains has caused them to reconsider their endorsement. Senators Padilla & Pan have yet to reply, but should they or or anyone from their staff respond to this inquiry, this article will be updated to include it.

The fact that the PPT potentially qualified for the ballot with the help of millions of dollars in ill-gotten gains is the sort of thing that could poison the well of potential support for the progressive income tax hike, even in a deep blue state like California. Those who have taken over GAP following Gabe Bankman-Fried’s departure, however, recently stated their intention to press forward despite the controversy surrounding the organization’s founder.

“Despite uncertainty about GAP’s future, the effort to prevent pandemics worse than Covid-19 is vitally important and we hope it will continue in some way,” Keenan Lantz, GAP’s new interim executive director, said in a statement. Lantz said he is “proud” of the GAP’s work and is hopeful “momentum” on pandemic prevention will persist. When contacted by this author for further comment, GAP staff did not respond.

When he came out against Proposition 30, the income tax hike on the 2022 ballot, Governor Gavin Newsom pointed out that it would make California’s famously volatile revenue collections even less predictable. Governor Newsom has yet to take a position on the PPT, but like the Proposition 30 tax hike, passage of the PPT would also make California revenue collections less stable.

According to IRS data, more than 83,000 sole proprietors, LLC, S Corp and partnership owners across California had income above $1 million in 2019, the most recent year available. While IRS data does not delineate how many of those 83,000 small business owners have income above $5 million, it is safe to assume that thousands of small business owners across California would be hit by the income tax hike that will appear on the 2024.

Critics of the PPT contend it will exacerbate the exodus of employers and taxpayers, particularly high-earners, from California to other states. “This is exactly why we’re seeing significant flight out of California and why wealthier individuals like Elon Musk are leaving for states like Texas and Florida,” said Jon Coupal, president of the Howard Jarvis Taxpayers Association.

Opposition from unions and Governor Newsom would seriously harm the PPT’s chances 2024, as was the case for Proposition 30 in 2022. But association with the FTX collapse and Bankman-Fried, coupled with the way in which the PPT will adversely affect small businesses, may be enough to keep the upper income tax hike from passing in 2024, even in a state as left-leaning as California.