Key facts
- California proposes a one-time 5% wealth tax on residents with over $1 billion in assets.
- The tax is estimated to raise $100 billion, with 90% allocated to healthcare.
- Opponents argue the tax could harm innovation, lead to capital flight, and is difficult to implement due to illiquid assets.
- Supporters believe the ultra-rich would remain wealthy even after paying the tax.
- Governor Gavin Newsom opposes the measure, while Representative Ro Khanna supports it.
A proposed wealth tax in California, targeting residents with over $1 billion in assets, has ignited a significant debate among the state's tech founders and investors. The initiative, slated for the November 2026 ballot, aims to impose a one-time 5% tax on net worth, with proponents, including the Service Employees International Union-United Healthcare Workers West, estimating it could generate $100 billion. Supporters suggest this revenue could offset federal cuts to health spending, and argue that even after paying the tax, the ultra-wealthy would remain among the world's richest.
However, the proposal faces strong opposition from prominent figures in the tech and venture capital sectors. Mark Cuban, Reid Hoffman, Peter Thiel, Larry Page, and Sergey Brin have voiced concerns. Hoffman described the tax as 'horrendous' for innovation, while Friedberg characterized it as an 'asset seizure' that could set a precedent. Critics point to the 'buy, borrow, die' strategy, where the wealthy borrow against assets to avoid selling and incurring capital gains taxes, suggesting that a wealth tax is an attempt to address this practice. Friedberg proposed taxing borrowed assets against unrealized gains as an alternative.
Other proposed alternatives include the government receiving illiquid stock as a loan or taxing already public stock. Opponents warn of negative impacts on economic growth and startups, and some billionaires have reportedly begun to distance themselves from California. The debate has also divided political figures, with Governor Gavin Newsom actively working against the proposal, while U.S. Representative Ro Khanna champions it, though he acknowledges the language may need refinement. Mark Cuban and Ro Khanna recently engaged in a public debate over the measure, highlighting concerns about capital flight and the liquidity of founders' assets.