Tech Leaders React to California Billionaire Tax Proposal

State labor groups have proposed a one-time 5% wealth tax targeting California residents with assets exceeding $1 billion. The measure, proposed by the Service Employees International Union-United Healthcare Workers West, aims to fill a projected multibillion-dollar state budget deficit. If the proposal gathers enough signatures, it will appear on the state ballot in November. If passed, the tax would apply retroactively to all qualifying residents as of January 1, 2026.

The proposal has ignited a debate among high-profile business leaders and politicians regarding its potential impact on the state's economy and innovation ecosystem. While some argue the tax is necessary to address inequality, others warn it will drive wealthy residents and businesses out of California. The state is currently home to major industries like Hollywood and Silicon Valley, though some key players have already relocated.

The wealth tax proposal targets California's wealthiest residents to address the state's financial shortfall. The specific terms of the measure are strict, targeting assets rather than income.

Key details of the proposed legislation include:

• A one-time 5% tax on assets exceeding $1 billion
• Application retroactive to January 1, 2026, if passed
• Requires voter signatures to reach the November ballot
• Proposed by the Service Employees International Union-United Healthcare Workers West

Legal representatives have already signaled potential consequences. Attorney Alex Spiro, who has represented billionaires and celebrities, sent a letter to Governor Gavin Newsom stating that his clients would permanently relocate if the tax becomes law.

Several prominent business figures have voiced strong opposition to the tax, citing concerns about liquidity and economic competitiveness. These leaders argue the tax targets unrealized gains and could stifle innovation.

Bill Ackman and David Sacks

Bill Ackman, CEO of Pershing Square Holdings, stated on X that he is "opposed to wealth taxes because they effectively represent an expropriation of private property." However, he noted he favors a "fairer tax system" to prevent individuals from living off loans secured by stock while paying no income tax. Ackman also attributed California's "budget problems" to spending rather than a lack of revenue.

David Sacks, the White House AI and crypto czar, criticized the state government, writing that "Democrats steal everything, then blame job creators for their 'greed.'" Sacks argued that wealth taxes "always backfire" because wealthy residents leave the state. He analogized the situation to "boiling a frog" and threatened to leave California himself.

Palmer Luckey and Garry Tan

Palmer Luckey, founder of Oculus and co-founder of Anduril, warned the tax would force founders to "sell huge chunks of our companies." Luckey explained that founders often have illiquid wealth tied up in their businesses and would struggle to pay billions in cash. He argued the policy forces companies to pivot to "profit obsession over mission or long-term sustainability."

Garry Tan, CEO of Y Combinator, wrote that the tax would "kill little tech in California." He explained that startup founders often become "paper billionaires" with illiquid stock, yet the tax targets unrealized gains. Tan indicated that if the tax passes, Y Combinator would consider opening programs in Austin or Cambridge.

Not all political figures oppose the measure. Ro Khanna, the Congressman for California's 17th district covering much of Silicon Valley, defended the proposal as "good for American innovation."

Khanna argued that companies are built because of available talent, not tax rates. "Jensen [Huang] wasn't thinking I won't start this company because I may have to one day pay a 1% tax on my billions," Khanna wrote. "He built here because the talent is here." He further stated that innovation is stifled by the "political dysfunction and social unrest" resulting from wide wealth gaps. A spokesperson for Khanna noted he has always supported a modest wealth tax to address inequality and healthcare.

While not explicitly commenting on the California proposal, Bernie Sanders posted on X supporting wealth taxes broadly, stating, "We can respect innovation & entrepreneurship, but we cannot respect the extraordinary greed that now exists. We need a wealth tax."

Governor Gavin Newsom has previously spoken against wealth taxes, citing competitiveness. At a conference in December, Newsom noted that wealthy individuals already have homes outside the state and emphasized the need for pragmatism. If the measure passes as a ballot initiative, Newsom would not have the authority to veto it.

Elon Musk also weighed in, reposting a comment on the tax. He argued that his wealth is tied up in Tesla and SpaceX shares and is not liquid cash. Musk wrote that his wealth increases only by "producing more products and services for the public." He characterized himself as a "maker" in contrast to "taker" politicians, though he did not directly address the California proposal.