CA Governor Candidate Steve Hilton on Why California is Destroying Itself & How a Republican Can Win

California faces a tax and affordability crisis, with rapidly rising living costs, overwhelming bureaucracy, and widespread fraud in state spending. A new fiscal reform plan aims to restructure taxes to benefit working-class residents, streamline government spending, and secure bipartisan support for sweeping change.

Comprehensive Tax Restructuring to Aid Working-Class Residents

Removing State Income Tax For Households Earning Under $100,000 Benefits 7 Million California Households

The plan proposes eliminating state income tax for California residents in households earning less than $100,000. This measure would benefit about 7 million households—just over a third of the state’s 40 million residents. In many California counties, $100,000 is officially considered low income due to the state's high cost of living, making this policy particularly impactful for workers earning between $70,000 and $100,000, who currently pay rates as high as 9.3%, exceeding the top rates in most other states.

Flat 7.5% Tax on Income Over $100,000 Simplifies Taxes, Maintains Revenue

For those earning over $100,000, the plan introduces a flat 7.5% state income tax. This move aims to simplify California’s complex tax code, reduce bureaucracy, and establish a pro-investment, pro-growth framework that is competitive with other states. The flat tax would apply only to income above the $100,000 threshold, while lower earners pay zero state income tax. This approach is expected to support business investment and help stem the outflow of residents and businesses from the state.

Tax Plan for Low-income Workers

The central focus of the tax reform is immediate and tangible relief for working-class Californians who are struggling with soaring gas, electricity, housing, and insurance prices. The proposal recognizes that many working poor households, who do not benefit substantially from welfare programs, are squeezed by high living costs and taxes. Eliminating state income tax up to $100,000 targets quick affordability improvements for those on the economic margins.

Necessary Government Spending Reductions and Fraud Elimination

18.5% Revenue Drop Necessitates $60 Billion Budget Cut to Pre-pandemic Levels

Implementing this tax plan requires an 18.5% reduction in state revenue, equating to approximately $60 billion. This would bring overall spending back down to pre-pandemic levels—California’s state budget has nearly doubled in the past ten years and increased 75% in the last five, with little measurable improvement in public services. The proposal argues that reducing spending to 2019 or 2020 figures would not harm core programs but would reestablish financial sustainability.

Cal Doge Finds $80 Billion Yearly Fraud, Waste, Misallocation in State Programs

An essential part of the plan is attacking waste, fraud, and abuse throughout the state’s finances. Steve Hilton’s Cal Doge (California Department of Government Efficiency) initiative has analyzed public spending data and published four separate fraud reports. Their findings estimate $425 billion in fraud, waste, and misallocation over the past five years—an average of $80 billion annually, or about 20% of the state budget.

Fraud Examples: Climate Fund Diverts $928M For Voter Activism; Cannabis Tax Redirects $350M For Politics; Project Homekey Spends $3.8b On Developers

Several case studies illustrate the scope of waste:

• Climate Fund: Out of $1 billion allocated over ten years for low-income solar panel installation, only $72 million bought actual solar panels. $928 million went to nonprofits engaged in voter registration and environmental activism.
• Cannabis Tax: Proposition 64 taxes, earmarked for substance abuse prevention, diverted $350 million to over 500 nonprofits, many focusing on voter outreach and activism rather than substance abuse treatment.
• Project Homekey: Of $3.8 billion for homelessness solutions, most funds enriched developers with little effective relief for the homeless, highlighting major ineffici ...

California faces significant growth challenges rooted in regulatory barriers, driving sky-high living costs and undermining energy and housing development. The interplay of the California Environmental Quality Act (CEQA), union influence, stringent codes, and climate policy has resulted in stifled housing production, soaring costs, and energy contradictions that negatively impact affordability and economic opportunity.

Ceqa Environmental Legislation and Housing Obstruction

CEQA, the California Environmental Quality Act, was designed as a protective measure for the environment but has become a major barrier to housing construction. Steve Hilton describes CEQA compliance as a "nightmare," emphasizing the impact of its private right of action provision, which allows any party to file lawsuits. Approximately 70% of CEQA lawsuits are used to block housing, and most of these are initiated by unions. These lawsuits serve as leverage in negotiating project labor agreements mandating the use of a "skilled and trained workforce," effectively limiting projects to union-only labor.

Union agreements require above-market wages—often two to three times higher—and create situations where there aren't enough qualified workers available locally. Developers sometimes have to fly in union workers from other states, significantly inflating costs with additional expenses for travel and accommodation. State bills such as AB130 and AB131, which Governor Newsom promoted as steps to solve the housing crisis, include fine print that only grants CEQA exemptions to projects adhering to these union agreements. Thus, the cost-inflating mechanisms that stem from CEQA persist even in supposed reform efforts.

Attempts to address these barriers, such as Hilton’s ballot initiative to cap impact fees at 3% of construction costs (impact fees currently comprise up to 20% of housing costs), and to eliminate CEQA’s private action rights, faced insurmountable union opposition. Even bipartisan legislative support was stymied due to union influence, with lawmakers acknowledging privately that such changes would be "transformational" but refusing to support them publicly because, as one legislator said, "the unions run this place."

Housing Construction Costs and Supply Shortage

California’s housing shortage is driven not just by CEQA, but by an overall environment of high building costs and regulatory requirements. For every new job created and new resident welcomed, California builds too few homes, creating a classic supply and demand squeeze that pushes rents and home prices to the nation’s highest levels.

Building costs in California are two to three times higher than in neighboring states. This is largely driven by mandates for EV charging, solar panels, insulation, and layered energy efficiency codes that, while well-intentioned, have been taken to extremes and offer little actual climate benefit relative to their cost.

Impact fees further inflate the expense. As Jason Calacanis explains, fees often reach $30,000 per housing unit (or "per door"), as opposed to under $1,000 in Texas—a state with neither CEQA nor comparable regulatory hurdles. Texas produces three times as many new housing units per capita as California, despite having fewer environmental regulations and a drastically lower fee structure. Yet, as Chamath Palihapitiya points out, there is little evidence that California’s extensive regulations yield better air, water, or land quality than Texas.

Consequently, a third of Californians struggle to afford basic needs, with the state reporting record levels of poverty and unemployment—even as it remains the world’s fourth-largest economy. The combination of limited housing supply, extreme building costs, and questionable regulatory benefits has left millions unable to keep up with the cost of living.

Energy Production and Climate Policy Contradictions

California’s approach to energy and climate policy has produced paradoxical and counterproductive outcomes. Despite having abundant domestic oil reserves, the state now imports roughly 80% of its oil, primarily from Iraq, following the sta ...

California faces persistent challenges across education, criminal justice, and homelessness, despite substantial public spending. Problems in union control, systemic accountability, and inadequate treatment strategies fuel cycles of dysfunction.

Education System Dysfunction and Union Control

California currently spends over $27,000 per student annually—nearly the highest in the nation—yet student outcomes remain alarmingly poor. Only 47% of students meet basic standards in English, and just 35% achieve proficiency in math. Two-thirds of students do not meet minimal math standards. Despite high expenditures, educational performance lags, raising concerns about how funds are used.

A principal cause is the entrenched control of teacher unions over the public school system. These unions act chiefly as political organizations, prioritizing ideological campaigns and benefits for members over student outcomes. For example, during the pandemic, California experienced the nation's longest and most damaging school closures, with teacher unions setting reopening conditions based on broad political demands—such as wealth taxes and Medicare for All—rather than student needs. This political influence is deepened by unions’ dominance as top donors to Democratic politicians, reinforcing the government school monopoly and driving education policy further from accountability or reform.

Structural reform is needed. Mississippi, for example, spends only one-third as much per student as California but has seen dramatically better outcomes in the past decade by focusing on core, evidence-based practices. Key measures include:

• Implementing phonics-based reading instruction, a proven technique for literacy, which is rarely used in California public schools.
• Mandating grade retention for students not reading proficiently by third grade—students must pass a basic reading test to move forward, receiving extra help if necessary and repeating the year if they do not succeed.
• Publicly grading schools and teachers based on available test scores, fostering transparency and accountability.

These changes, already successful elsewhere, could address California's academic decline if unions’ grip can be loosened and policy redirected toward student achievement.

Crime and Incarceration System Failures

California’s criminal justice system is plagued by policy decisions that have undermined accountability, overcrowded local facilities, and discouraged effective law enforcement. Recent years have seen a reduction in state prison capacity from a peak of 165,000 inmates in 2006 to around 93,000, accelerated by the closure of four to five prisons under Governor Newsom's administration. Instead of releasing inmates into supervised programs, the state has transferred many dangerous offenders to already-overcrowded county jails. This has created a "catch and release" dynamic—offenders are quickly released after arrest due to lack of jail space—resulting in law enforcement demotivation and eroding public trust and safety.

California's recidivism rate remains among the worst nationally, nearly double compared to top-performing states like Virginia. Core to the state's failure is the lack of robust rehabilitation programming, especially for inmates with literacy issues or untreated dyslexia. Many prisoners cannot read proficiently, and up to 70% have severe mental health issues. Rather than investing in practical rehabilitation, reform efforts have been driven by ideology—prioritizing decarceration or labeling prison itself as fundamentally racist—over the basic goals of safety and rehabilitation.

A reversal of prison closures, increasing capacity, would relieve jail overcrowding and restore the possibility of accountability-based prosecution. This is now more feasible as the U.S. Supreme Court’s 2024 Grants Pass v. Oregon decision overturned previous restrictions, removing legal obstacles to clearing homeless encampments and enhancing the state’s ability to enforce public order. Local politicians can no longer cite lack of shelter as an excuse; sufficient legal authority now exists to address street crime and pub ...

Steve Hilton and Jason Calacanis discuss the prospects and pathways for a Republican victory in California’s 2026 gubernatorial race. They analyze voter trends, statewide sentiment, policy priorities, and how to build a coalition that appeals to California’s increasingly multiracial working class, with a specific focus on cost-of-living concerns and principles rooted in both conservative and immigrant values.

Viability of Republican Victory in California

Hilton and Calacanis argue that it’s not unrealistic for a Republican to win the governor’s seat in California. They cite historical precedent: Pete Wilson and Arnold Schwarzenegger, both Republicans, collectively governed for 16 of the last 36 years. Hilton supports this point with data from recent elections: in the 2024 presidential race, over 6.1 million Californians voted for Donald Trump, surpassing the estimated 5.9 million votes needed to win a statewide midterm election based on turnout averages from 2018 and 2022. This outpaces the votes cast in the last gubernatorial race—demonstrating that, in raw numbers, there is a large enough GOP-aligned electorate to win, even without Democratic crossover.

Importantly, California’s top-two primary system is likely to result in a November contest between one Republican and one Democrat, not two Democrats. Hilton predicts that his opponent will be one among Tom Steyer, Katie Porter, or Javier Becerra—all representing “more of the same” or a move further left. This sets up a clear change-versus-status-quo dynamic for voters.

Recent polling indicates most Californians feel the state is on the wrong track: the proportion of voters dissatisfied with California’s direction has risen from the mid/high 40s to the mid/high 50s over the last cycle. Despite the Democrats’ registration advantage, this environment of discontent enhances Republican chances, as voters demonstrate an appetite for change-minded candidates.

Multiracial Working-Class Coalition Building

Hilton emphasizes the need for a coalition that mirrors Trump’s multiracial, working-class support, focusing on practical, daily cost-of-living solutions over traditional partisan ideology. Key policy promises include no state income tax on the first $100,000 of earnings, lower utility bills (with a “half your electric bills” pledge), $3 per gallon gasoline, and affordable homeownership for working families.

The November 2026 ballot will further feature a Voter ID measure, expected to drive turnout among Republicans, who are particularly enthusiastic about the issue in a typically low-participation midterm.

Success, Hilton argues, hinges on appealing to the specific economic pressures faced by the working class—especially those in diverse, multicultural communities. Messaging must be laser-focused on delivering tangible solutions rather than echoing partisan or purely ideological arguments.

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