The Centers for Medicare and Medicaid Services finalized a rule this month barring federal reimbursement for gender-affirming medical care provided to minors. The change takes effect Oct. 13, and could immediately affect roughly 1,500 transgender and gender-nonconforming children across California who rely on Medi-Cal for puberty blockers, hormone therapy and related treatment.

In response, state legislators are pushing for $10 million in emergency funding before the legislative session ends, intended to bridge the gap while the Department of Health Care Services builds a new, state-only funding system that doesn’t rely on federal dollars. But the department itself has said that process could take up to a year — far longer than the six weeks lawmakers have to act.

Assemblymember Chris Ward, a San Diego Democrat who chairs the Legislature’s LGBTQ caucus, said the stakes are high for a population that depends heavily on public assistance.

“They’re low-income Californians who need support arguably the most, and Medi-Cal is their lifeline to access that care,” Ward said. “We need to stand up for them.”

Still, many parents and advocacy organizations say they doubt the state can create a new program in time — and feel blindsided after months of budget talks that they believed had already addressed the issue.

For nearly eight months, LGBTQ advocates and medical groups warned California officials that federal cuts were coming and pressed for the state to set aside funding to protect transgender youth on Medi-Cal. Many believed lawmakers had done just that in June, when the state budget included $56 million earmarked for gender-affirming and reproductive health services.

But after the budget passed, advocates discovered that language guaranteeing a portion of that money would fund a separate, state-run Medi-Cal pathway for transgender children had quietly been removed by the Newsom administration.

One mother, identified by CalMatters only by her initials, A.W., to protect her children’s privacy, said she felt misled.

“I thought that when we took our kids to Sacramento to meet with members of the Assembly and Senate that we were advocating for a backfill that would cover kids on Medi-Cal who would lose those federal dollars,” she said. “I’m really disappointed that our coalition spent so much time and effort on something that I’m not sure we’ll reap the benefits of, and that sucks.”

The Department of Health Care Services, which oversees Medi-Cal, declined to explain why the funding wasn’t specifically directed toward the program, referring questions instead to the Department of Finance. A finance department spokesperson said officials were “aware of this particular issue” but offered no further details.

Ward said the state budget — which grappled with California’s fourth consecutive deficit — left little room for new commitments, and noted that the federal rule hadn’t been finalized when budget negotiations concluded in June.

The California Health and Human Services Agency has pointed to the $56 million already allocated, stating on social media that the state remains “committed to ensuring all people have access to the medically necessary, evidence-based care that will allow them not only to survive, but thrive.”

But advocates argue that statement obscures the reality of how the money will actually be spent. Arne Johnson, an organizer with Rainbow Families Action, called the framing misleading.

“In the end, not a penny of it is going to backfill Medi-Cal at all,” Johnson said.

According to two people familiar with the budget negotiations, the funds will instead go toward building up infrastructure at transgender health clinics — a response to more care shifting from hospitals to outpatient settings amid federal pressure — as well as supporting other groups affected by federal funding cuts, including military families and veterans.

While many advocates welcome that long-term investment, they say it does little to address the immediate risk facing children who could lose care within weeks.

“It’s been very frustrating to see California say in many words that it’s supportive of trans people, and be so unprepared for something we all knew was about to happen,” Johnson said.

Laura Sheckler, budget and policy director for the California Primary Care Association, which represents community health clinics, said time is running out for the state to act.

“The bigger question is how is California going to ensure that whatever they set up is going to be available on Oct. 13 when these rules go into effect?” she said.

For A.W.’s family, the stakes are deeply personal. Her eldest son, now 15, has received care through Stanford’s specialty gender clinic since he was 8, when he began seeing a therapist after showing signs of gender dysphoria from an early age — pulling bows from his hair, resisting dresses and asking why he couldn’t use the bathroom standing up.

“We had zero education or inkling that he might be trans, but as we started educating ourselves and learning more, we realized that he at a very, very young age was verbally communicating with us who he is,” A.W. said.

The family relocated from Virginia to the Bay Area, and her son later began puberty blockers before transitioning to weekly testosterone injections, which he now administers himself. When her husband lost his job two years ago, Medi-Cal allowed her son to continue seeing the same medical team without interruption — something A.W. said was critical to his wellbeing.

Her younger child came out as transgender last year as well, adding another layer of urgency to the family’s concerns about the looming funding cliff.

For her eldest son, she said, any disruption in access to testosterone wouldn’t just be an inconvenience — it could force an unwanted medical detransition.

“A gap in care for my son is a terrible thing,” A.W. said. “He doesn’t take testosterone and what happens? He would be forced to medically detransition. It’s unacceptable that the state wasn’t prepared.”

Original source: CalMatters

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The Billionaire Tax Act, which backers are pushing to get on the November ballot, would charge California’s 200-plus billionaires a one-time, 5% tax on their net worth in order to backfill billions of dollars in Republican-led cuts to federal healthcare funding for middle-class and low-income residents.

Critics of the proposal have argued that past failures of similar wealth taxes in Europe prove they don’t work and can cause more harm than good, including by driving the ultra-rich out. Among those critics is San José Mayor Matt Mahan, a tech-friendly Democrat who is contemplating a run for governor.

“Over the last 30 years, we’ve seen a dozen European countries pursue national-level wealth taxes,” Mahan said. “Nine of them have rolled them back. A majority have seen a decline in overall revenue. It’s actually shrunk the tax base, not increased it, and it’s because it creates a perverse incentive and drives capital flight.”

Backers of the measure acknowledge such failures but say that they learned from them and that California’s proposal is stronger as a result.

Brian Galle, a UC Berkeley tax law professor and one of four academic experts who drafted the measure, said if it gets on the ballot, every voter in the state will receive a copy of the full text, a one-page explainer on what it does, and nearly two dozen additional pages of “rules for preventing wealthy people and their army of lawyers from dodging” it.

Many of those rules, he said, are based on historical lessons from places where such taxes have failed, but also where they’ve succeeded.

“If you understand the actual lessons of history, you understand that this bill is more like the successful Swiss and Spanish wealth taxes,” Galle said. “Part of that is learning from history.”

Warnings from Europe

Since the 1990s, several European countries have repealed net wealth taxes, including Austria, Denmark, Finland, France and Germany.

A major example cited by critics of the California proposal is France, which implemented a much larger wealth tax on far more people, including many millionaires. The measure raised modest revenues, which fell as rich people moved out of the country to avoid paying, and the measure was repealed by the government of President Emmanuel Macron in 2017.

In a 2018 report on net wealth taxes, the Paris-based Organization for Economic Co-operation and Development found that European repeals were often driven by “efficiency and administrative concerns and by the observation that net wealth taxes have frequently failed to meet their redistributive goals.”

“The revenues collected from net wealth taxes have also, with a few exceptions, been very low,” it found.

Critics and skeptics of the California proposal say they expect California to run into all the same problems.

Mahan and others have pointed to a handful of prominent billionaires who already appear to be distancing themselves from the state, and said they expect more to follow — which Mahan said will reduce California’s “recurring revenue” beyond the amount raised by the one-time tax.

Kent Smetters, faculty director of the Penn Wharton Budget Model, which analyzes the fiscal effects of public policies, said net worth taxes in other countries have “always raised quite a bit less revenue than what was initially projected,” in large part because “wealth is easy, as it turns out, to try to reclassify or move around” and “there’s all these tricks that you can do to try to make the wealth look smaller for tax purposes.”

Smetters said he expects that the California measure will raise less than the $100 billion estimated by its backers because billionaire wealth in California — much of it derived from the tech sector — is relatively “mobile,” as many tech barons can move without it affecting business.

“Policymakers have to understand that they’re not going to get nearly as much money as they often project from a purely static projection, where they’re not accounting for the different ways that people can move their wealth, reclassify their wealth, or even just move out of the state,” Smetters said. “So far, we only know of a few people — with a lot of money — who have moved out of the state, [but] that number could go up.”

Kevin Ghassomian, a private wealth lawyer at Venable who advises rich clients, said he expects the administrative costs of enforcing the tax to be massive for the state — and much greater than the drafters have anticipated.

On the front end, the state will face a wave of legal challenges to the tax’s constitutionality and its retroactive application to all billionaires living in the state as of the end of 2025.

Moving ahead, he said, there will be litigation from wealthy individuals whose departure from California is questioned or who dispute the state’s valuation of their net worth or individual assets — including private holdings, which the state doesn’t have extensive experience assessing.

Valuating such assets will be “a nightmare, just practically speaking, and it’s going to require a lot of administrators at the state level,” Ghassomian said, especially considering many California billionaires’ wealth is in the form of illiquid holdings in startups and other ventures with fluctuating market valuations.

“You could be a billionaire today, and then the market plummets, and now all of a sudden, you’re a pauper,” he said. “It could really lead to some unfair results.”

Lessons from Europe

Backers of California’s proposal said they have accounted for many of the historical pitfalls with wealth taxes and taken steps to avoid them — including by making it harder for wealthy Californians to simply shuffle money around to avoid the tax.

“There are a lot of provisions that are designed based on what has worked well in other countries with wealth taxes in the modern era, especially Switzerland, and there are also provisions meant to shut down some of the holes in some of the earlier wealth tax efforts, especially the France one, that were viewed as not successful,” said David Gamage, a University of Missouri tax law professor and another of the proposal’s drafters.

Galle said the Organization for Economic Co-operation and Development study found that many of Europe’s historical wealth taxes “hadn’t figured out how to solve the problem of what small businesses were worth,” so were more narrowly focused on publicly traded stock and real estate. “Over time, there was a lot of abuse where people shifted their assets to make them look privately held.”

The California proposal “tries to solve that problem” by including small businesses and other privately held wealth in their calculations of net worth, he said — and benefits from the fact that such wealth has gotten a lot easier to track and appraise in recent years.

Doing so would be a familiar exercise for many California billionaires already, he said, as it is hard to raise venture capital, for example, without audited financial statements.

Backers of the measure said it is harder for U.S. citizens to avoid taxes by moving abroad than it has been for Europeans, and that evidence from Switzerland and Spain suggests differing tax rates between a nation’s individual states do not cause massive interstate flight.

For example, each state in Spain sets its own wealth tax rate, and Madrid’s is 0% — but that has not caused an exodus from other parts of Spain to Madrid, Galle said.

The risk of California billionaires avoiding the tax by simply moving to another U.S. state was further mitigated by the measure’s Jan. 1 deadline for avoiding the tax. Galle said the deadline “was intended to make it more difficult for individuals to concoct the kind of misleading, apparent moves that wealthy people have used in other places to try to avoid a wealth tax.”

Gamage said that “history shows if a tax on the wealthy can be avoided by moving paper around, claiming that you live in another location without actually moving your life there, moving assets to accounts or trusts nominally in foreign countries or other jurisdictions, you see large mobility responses.”

But when “those paper moves are shut down,” there’s much less moving — and “that’s the basis for the California model,” he added.

The outlook

Ghassomian, who said he has been “fielding a lot of inbound inquiries from clients who are just kind of worried,” said it is clear that the proposal’s authors “have done their homework” and tried to design the tax in a smart way.

Still, he said, he has concerns about the cost of administering the tax outpacing revenues, especially amid litigation. Residency battles alone with billionaires whose claims of departing the state are questioned could take “years and years and years” to resolve, he said.

“The revenue has to line up with expenditures, and if you can’t count on the revenue because it’s going to be tied up in courts, or it’s going to be delayed, then I think that creates some real logistical hurdles,” he said.

Smetters said predicting revenues from a tax on so many different types of assets is “really hard,” but one thing that has generally held true through history is that “most countries, even with less-mobile wealth, typically do not get the type of revenue that they were hoping for.”

David Sacks, a venture capitalist and President Trump’s AI czar who decamped from California to Texas, said on the sidelines of the World Economic Forum in Davos, Switzerland, last week that the measure was an “asset seizure” more than a tax, and that the state would be headed in a “scary direction” if voters approved it.

Darien Shanske, a tax law professor at UC Davis and another drafter of the proposal, said he and his colleagues did their best to “look at the lessons of the past, and apply them in a way that makes sense and is generally fair and administrable” — in a state where wealth inequality is rapidly growing and a wealth tax presents unique opportunities.

“Having a tax on billionaires does make particular sense in California because of the large number that live here and the large number who have made their fortune here,” he said.

Shanske said the proposed tax is designed to provide California a way to “triage” soaring healthcare premiums resulting from legislation enacted by the Trump administration and congressional Republicans. The proposal asks for contributions from people who will quickly recoup what they are taxed given the exponential growth of their assets, he said.

Emmanuel Saez, director of the Stone Center on Wealth and Income Inequality at UC Berkeley and another drafter of the measure, said many of the repealed European taxes targeted millionaires while providing loopholes for billionaires to avoid paying, whereas California’s measure is “exactly the reverse.”

He said the measure will raise substantial revenue in part because California billionaire wealth more than doubled from 2023 to 2025 alone, and is “the innovative and first-of-its-kind tax on the ultra-wealthy that the moment requires.”

Thomas Piketty, a French economist and author of “Capital in the Twenty-First Century,” called California’s proposed tax “very innovative” and “relatively modest” compared with massive wealth taxes after World War II — including in Germany and Japan — and said it would not only improve healthcare in the state but “have an enormous impact on the U.S. and international political scene.”

“In the current context, with a deeply entrenched billionaire class, wealth taxes meet even more political resistance than in the postwar context, and this is where California could make a huge difference,” he said. “The fact of targeting the revenue to health spending is also very innovative and can help convince the voters to support the initiative.”

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