Walters: Silicon Valley flexes financial muscle in governor’s race and wealth tax battle

Over the last half-century, digital technology has reshaped the daily lives of people everywhere and created vast new industries. But no spot on the globe has been more affected than its birthplace.

The transformation of the Santa Clara Valley from a bucolic grower of fruit into the technological powerhouse of Silicon Valley — thanks largely to Stanford University’s presence — fueled a dramatic evolution of California’s economy, growing it into the fourth largest in the world, were it a nation.

Technology isn’t just a linchpin of the economy; the immense personal wealth of its creators has — perhaps unfortunately — become a crucial source of revenue for the state. The top 1% of California’s taxpayers generate nearly half its personal income taxes or, put another way, nearly a third of the state’s general fund revenues.

Despite its importance to California’s economy and budget, Silicon Valley has not — compared to other major economic sectors — paid much attention to state government.

While farmers, bankers, medical providers, casino-owning tribes and other segments of the economy have hired lobbyists and doled out campaign money, tech tycoons have assumed their products and services were so obviously valuable to the state, they needn’t worry about what was happening in Sacramento.

That attitude is changing fast.

Efforts to regulate artificial intelligence, the industry’s hot new product, and to impose new taxes on the business are fueling the creation of campaign war chests — to elect friendlier legislators, oppose hostile legislation and block ballot measures like the one that would impose a new tax on wealth.

Silicon Valley also is doing something it never would have done in past years — trying to elect a tech-friendly governor.

The field of would-be governors is wide, but the two likely to have the most campaign money are billionaire investor Tom Steyer and San Jose Mayor Matt Mahan, who represent the ideological parameters of the Democratic hopefuls.

Steyer is making an obvious bid for support from the Democrats’ left wing, endorsing efforts to raise taxes on corporations and the wealthy, while Mahan is counting on his friends in Silicon Valley to supply as much money as he needs to mount a credible run.

The techies are diving into the gubernatorial campaign because Gov. Gavin Newsom, who has generally backed Silicon Valley in policy battles — especially conflicts over taxes and artificial intelligence — will be gone in a year. And as his governorship winds down, the state’s Democratic Party seems to be moving leftward.

This week, Steyer said that if elected, he would call a special election to modify California’s iconic property tax limit, Proposition 13, so that taxes on commercial property could be increased. That change, dubbed a “split roll” and long sought by public employee unions, was rejected by voters in 2020 but remains a holy grail among unions and other left-leaning groups.

Steyer told Politico that cuts in federal aid to states by President Donald Trump and a Republican-dominated Congress leave a budget hole that must be filled by new taxes on business.

“We really can’t wait,” Steyer said. “We’re on the clock. And so, yes, the only way to pass that is with a special election.”

Mahan immediately rejected Steyer’s tax plan, calling it “the wrong approach.”

Steyer has also endorsed the proposed wealth tax, which would hit Silicon Valley’s billionaires and has already resulted in some changes of residence to Florida and other low- or no-income tax states.

Mahan, meanwhile, has joined Newsom in opposing the measure, saying it would backfire by encouraging wealthy people to leave California and take their taxable incomes with them.

This could be the year that Silicon Valley, which has reshaped California’s culture and economy, also reshapes its politics.

Dan Walters is a CalMatters columnist.