The pros and cons of California’s wealth tax

Good morning and welcome to FirstFT. In today’s newsletter:

• California’s wealth tax debate looms

• Energy IPOs surge as investors hunt for ways to play AI boom

• Under Magyar, is Hungary’s new era at hand?

• Parenting by spreadsheet

You can listen to today’s top news stories in the FT News Briefing podcast.

California is gearing up for what could be one of the most consequential votes in November’s elections. Official arguments for and against America’s first wealth tax are not published until next week but campaigning is already well under way.

On the ballot is a proposal to levy a one-off 5 per cent tax on the paper wealth of every billionaire who was resident in the state on January 1 2026. The revenues raised by the measure will replace healthcare funding stripped from the state by President Donald Trump’s One Big Beautiful Bill, supporters say. The vote was proposed by the state’s healthcare union.

The proposed tax will target the state’s wealthy tech entrepreneurs and venture capitalists. Forbes estimated California’s billionaires had a net worth of $2.1tn at the end of last year, up from $700bn in 2019.

Some of those billionaires are now organising to defeat the proposal. Google’s co-founder Sergey Brin has poured $82mn of his $270bn fortune into a new campaign group, Building a Better California. Cryptocurrency entrepreneur Chris Larsen, venture capitalists John Doerr and Michael Moritz and the founders of Stripe, Affirm and DoorDash are among those who wrote seven-figure cheques to the group.

Larsen has also set up a second outfit to oppose the tax, while he and Google’s former chief executive Eric Schmidt are helping fund Brin’s group and funnel money into the campaign via the California Business Roundtable. In all, at least $129mn has been collected directly from billionaires for the fight.

“It’s going to be a very bloody fight,” said Sequoia Capital’s Moritz.

Opponents of the proposal argue it will lead to an exodus of businesses and entrepreneurs from the state and say it is a tax on success. They also claim the tax will not be a one-off and will be extended once introduced. But in a year where New York mayor Zohran Mamdani’s crowds chant “tax the rich” and democratic socialists are unseating moderate Democrats from Maine to Colorado, the California ballot will be a test of the public’s pitchfork-wielding mood.

The tax would be a real-world test of proposals long advocated by a group of French economists whose most famous member, Thomas Piketty, had a bestseller in the US after the financial crisis with Capital in the Twenty-First Century.

Piketty’s longtime collaborators Emmanuel Saez and Gabriel Zucman, who split their time between Paris and the University of California Berkeley, have been working with the SEIU, simplifying economic arguments for the campaign blitz.

Others in the US and around the world will also be watching closely to see how Californians react to the prospect of their state imposing a first-of-its-kind tax. Read the full story.

Here’s what else I’m keeping tabs on today:

Five more top stories

1. Donald Trump’s former defence secretary has warned that the US will not win its war against Iran through aerial bombardment and must “strangle” the Islamic republic’s economy to force open the Strait of Hormuz. Mark Esper, US defence chief during Trump’s first term, told the FT the strategy would not change Iran’s stance and desire to “keep control of the strait”. Read the full interview.

2. Delivery Hero has agreed to be taken over by Uber in a deal that values the company at about €13bn in an acquisition that will further consolidate the global food delivery market. The transaction will split Delivery Hero, with the group selling its Turkish arm Yemeksepeti alongside business units covering 13 other markets in Europe and South America to New York-based SSW Partners.

3. The Trump administration has slapped a new 25 per cent tariff on imports from Brazil. The US Trade Representative announced the action yesterday, alleging unfair trade practices in areas including electronic payments, the ethanol market, intellectual property, anti-corruption enforcement and environmental protection.

4. Energy companies are raising money at initial public offerings at their fastest pace this century, taking advantage of investors’ hunt for new ways to bet on the boom in power-intensive AI data centres. IPOs for energy groups raised $12.6bn in the first half of this year, according to data firm Dealogic.

5. Taiwan Semiconductor Manufacturing Company has said it plans to invest another $100bn to expand production in the US as the world’s leading supplier of chips to Nvidia and Apple raised its revenue forecasts and capital spending plans. The new investment for its plant in Arizona brings TSMC’s total commitment to US chipmaking to $265bn.

Hungary’s new era

Since Péter Magyar and his Tisza party swept into power after defeating the illiberal nationalist prime minister Viktor Orbán, Magyar has taken sweeping moves to dismantle his predecessor’s machinery.

This week his government amended the constitution to remove the president, Tamás Sulyok, an Orbán ally. It is also strengthening anti-corruption bodies, reinforcing judicial independence, dismantling agencies and foundations controlled by the Fidesz party and removing Orbán-era appointees from state energy companies, banks and regulators.

But the scale of the change is such that even staunch opponents of Orbán’s authoritarianism question whether Magyar was moving too far too fast, while others detect a populist streak and fret about his ability to take unpopular decisions.

Is Hungary witnessing a revolution under Magyar or is it just exchanging one strongman for another?

We’re also reading . . . 

Chart of the day

Since her first child was born, Soumaya Keynes had been filling in a parenting spreadsheet to monitor how close she and her husband were to a shared objective: dividing childcare as evenly as possible.

Take a break from the news . . . 

Christopher Nolan’s $250mn retelling of The Odyssey is both crazy and conventional, writes film critic Danny Leigh. Read the review.