Tax Foundation says some founders, tech executives, and other ultra-wealthy residents could face ‘dramatically higher’ consequences.

The proposed California wealth tax aimed at billionaires could expose some founders, tech executives, and other ultra-wealthy residents to effective rates well above its advertised 5% level, according to a new analysis from the Tax Foundation.

In a note published Wednesday, the group argues that the ballot initiative’s valuation rules, treatment of voting shares, and anti-avoidance provisions could sharply raise liabilities and complicate planning for high-net-worth clients with ties to the state.

The 2026 Billionaire Tax Act would ostensibly impose a one-time 5% tax on the net worth of the state’s billionaires.

But the Tax Foundation analysis argues that “due, however, to aggressive design choices and possible drafting errors, the actual rate on taxpayers’ net worth could be dramatically higher.” The commentary suggests those effects would be most acute for founders of public companies and owners of closely held businesses with illiquid or hard-to-value assets.

One of the paper’s central concerns is how the initiative would value ownership stakes when founders hold super-voting or nonstandard share classes. Under the measure, wealth tax liability would be based on the market value of the company’s widely traded stock, even if the founder’s holdings carry special voting rights and are not reflective of what an ordinary investor could sell. That mismatch, the analysis says, could force founders to convert their shares, unwind dual-class structures or sell down positions simply to cover the tax bill.

The Tax Foundation models several high-profile founders and their companies using recent market data to game out potential outcomes. In the case of Tony Xu, the co-founder of DoorDash, the group estimates that “selling his shares to raise cash to pay his wealth tax liability for his DoorDash shares would be $4.17 billion – some 173 percent of his total wealth.” The commentary concludes that, based on those assumptions, “the tax would bankrupt him based on an FTB determination to set aside this valuation.”

Other big names on the list included:


Sergey Brin and Larry Page, who based on their stakes in Alphabit, would subject them to taxes of $80.53 billion and $86.6 billion, respectively;
Meta CEO Mark Zuckerberg, who’d face a $76.61 billion tax bill; and
Nvidia CEO Jensen Huang, whose acceptance of the measure would be tested by the estimated $13.52 billion tax hit he’d take. 

Private company owners also face significant questions. The initiative would require many nonpublic firms to be valued using a formula tied to Generally Accepted Accounting Principles, with a multiple of earnings that the Tax Foundation says far exceeds typical estate or wealth tax practice. That approach, the group argues, risks treating businesses as if they were fully marketable and easily sold, even when their actual liquidity profile and deal history suggest otherwise.

The analysis also points to stipulations within the proposal that “fair market value excludes forced-sale pricing,” which could artificially inflate business values and overstate what the taxpayer’s stake in their company is worth. In practice, that could mean founders and early investors in startups, private equity-backed companies or family businesses see tax assessments based on hypothetical valuations that would be difficult or impossible to realize through liquidation into cash.

Another flashpoint is the initiative’s anti-avoidance and residency rules. The proposal includes broad provisions capturing the “entire value of any trust to which assets are transferred in 2026,” which the Tax Foundation says could pull previously transferred assets back into the tax base and chill otherwise standard estate planning. It also relies on a “snapshot” of wealth and residency as of January 1, raising the stakes for clients considering whether to relocate before the measure takes effect.

For taxpayers who stay, the measure would allow use of Optional Deferral Accounts to spread payments over multiple years. But the Tax Foundation notes that the deferred amounts would accrue interest, increasing the effective cost of the tax and potentially heightening liquidity stress for founders whose wealth is overwhelmingly tied up in a single stock or private business.

Read more: Newsom steps up fight against California’s billionaire tax plan

For advisors, especially RIAs serving ultra-high-net-worth entrepreneurs, the analysis underscores how state-level tax design can reshape planning around exits, control, and domicile. Those with clients in tech, venture capital, private equity or closely held enterprises may need to run scenarios involving changes to ownership structures, trust strategies and residency, while also modeling the risk that valuations used for wealth tax purposes diverge sharply from what markets are willing to pay.

“The initiative systematically overvalues assets, exacerbating the proposed tax’s economic harm and enhancing the case for outmigration to avoid such an aggressive, economically destructive tax,” the Tax Foundation says.