Nothing brings tech titans together like taxes.
This week, as the specter of a California “billionaire tax” ballot initiative gained momentum, the moguls grew furious. The outrage reached a fever pitch on X, where the following scenarios were predicted, should the initiative be approved in November: The next great tech company will be built in China (opens in new tab), Anduril founder Palmer Luckey could be “screwed for life,” (opens in new tab) and (should you believe “All-In” host David Friedberg (opens in new tab)) California will slide into “the darkest of human fantasy — socialism.”
But what does the proposal actually say? Who would have to pay up? Is it time to start addressing your neighbors as “comrade”? Here’s a cheat sheet to cut through the panic.
What is this tax measure?
The Billionaire Tax Act is a ballot initiative aimed for the November election that would create a one-time 5% tax on California residents with a net worth of more than $1 billion — that’s about 200 people. They could choose to pay the bill all at once or spread the payments over five years. (Installment payments would accrue interest.)
Should the measure pass, the tax is projected to raise roughly $100 billion, which would be placed into a special fund. Of that, 90% would go toward state-funded healthcare services; the legislation says this is necessary to offset recent Republican budget cuts to Medicare. The remaining funds would go for food assistance and education programs.
Whoa, is this thing for real?
Hold your horses. We’ve got a long way to go: The initiative was submitted in October, but it will need to earn 874,641 signatures — about 4% of registered voters in California — to qualify for the November ballot. If it appears on the ballot, it will need a simple majority to pass.
Who’s pushing for it?
The proposal is sponsored by the Service Employees International Union-United Healthcare Workers West, a powerful union with more than 120,000 members. It also has support from Ro Khanna, Silicon Valley’s representative in Congress. “A billionaire tax is good for American innovation which depends on a strong and thriving American democracy,” Khanna wrote on X. (opens in new tab)
A Democrat, Khanna has enjoyed wide support from tech founders. Venture capitalist David Sacks threw him a fundraiser in 2023, and Peter Thiel donated to his campaign (opens in new tab) in 2011. So Khanna’s support for the initiative has ruffled some feathers in the Valley.
Who really, really doesn’t want it?
Those 200 billionaires, of course. But also Gov. Gavin Newsom, who has begun raising money for a committee to oppose the ballot measure, according to The New York Times (opens in new tab).
“You can’t isolate yourself from the 49 other states,” Newsom said (opens in new tab) this month. “We’re in a competitive environment. You’ve got to be pragmatic about it.”
Wait, what about paper billionaires — those people who are worth 9 zeros only because of startup equity?
This is one of the main complaints from Silicon Valley: In the past five years, many AI startups have been valued in the billions of dollars. But tech is fickle, and today’s princess could be tomorrow’s toad. Any of the darlings could fail in the next few years — but if the tax measure passes, the founders would conceivably still be on the hook for millions.
The initiative makes an effort to account for this possibility, with some fancy math about valuations. But none of that soothes Silicon Valley. “If it passes, the net effect will only be the destruction of the SV startup ecosystem,” Replit founder Amjad Masad wrote on X. (opens in new tab)(Replit is valued at more than $3 billion.)
Khanna has tried to address those concerns. “I oppose capital gains on unrealized gains,” he wrote (opens in new tab). “I support a 1-2 percent wealth tax on established billionaires with workarounds for founders who have illiquid assets and unprofitable companies.”
Couldn’t the billionaires just move to another state?
Sure, if they have a moving van in the driveway today. If the billionaire tax passes in November, the bill will retroactively apply to any billionaires living in California as of Jan. 1, 2026.
Some have made preparations to flee, like Thiel and Google cofounder Larry Page. This month, three limited liability companies associated with Page cropped up in Florida, according to The New York Times. (opens in new tab) The same report said Thiel has considered opening an office for his firm, Thiel Capital, outside of California.
But moving assets and residency can be difficult. Billionaires tend to have deep roots and wealth tied up locally. It could be especially difficult to ditch California, where the tax agency is known to be aggressive and may factor in the location of bank accounts, investments, and voter registration.
But c’mon! California is where the future happens. Would all those billionaires really just leave?
That’s a hard question to answer. Certainly Silicon Valley has decades of culture, capital, and network effects that make, say, Miami a distant second as a place to make one’s fortune.
But a 5% tax represents real money: Using the net worths from the latest Bloomberg Billionaires Index (opens in new tab), Page would have to fork over $13.5 billion, his Google cofounder Sergey Brin would be on the hook for $12.5 billion, and Mark Zuckerberg would be tagged for $11.7 billion. Those are staggering tax bills. But for that handful of locals worth $300 billion or so, what’s $10 billion, more or less?
But even if it passes, is this legal?
This is the million-dollar — ahem, billion-dollar — question. Legal experts are drafting memos about how this tax would violate various constitutional protections and clauses, not to mention protections under state law. And given that those targeted have billions to spend (and at stake), we should expect many years of lawsuits ahead if the initiative passes — and that’s a pretty big if, considering how much they would shell out to campaign against it.