The richest Californians are worried a controversial proposal to levy a one-time tax on their wealth might actually take more of their net worth than intended.
The text of the proposed ballot measure calls for a one-time 5% wealth tax on an estimated 200 taxpayers and trusts with assets valued over $1 billion. The tax could be paid in 1% installments over five years.
The proposal is still in the signature-gathering phase, but if it qualifies for the ballot — which the organizers expect — then anyone with a net worth over a billion dollars living in California as of Jan. 1, 2026, would be on the hook for the payment. As the proposal made headlines, at least six high-profile billionaires left California, including Peter Thiel, who opened an office in Miami, and venture capitalist David Sacks, who opened one in Austin, Texas. Google co-founders Larry Page and Sergey Brin also converted some of their business interests out of state to the Nevada side of Lake Tahoe.
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Those moves, opponents argue, support their claim that the tax will lead to lost innovation in California. Another criticism of the proposal is how it values wealth altogether, with startup workers protesting that they could be subject to the tax due to high valuations for shares they own in their companies, well before those valuations translate to actual cash wealth. Now, there’s yet another layer of concern.
Opponents have argued that another asset could also be quietly taxable: founders’ super-voting shares of their companies. Super-voting shares are different from actual shares of a company in that they give founders and early employees increased decision power over their companies. A popular example is Meta founder Mark Zuckerberg, who owns about 13.7% of his company via shares but has retained 61% voting control. Opponents of the billionaire tax argue that the state could interpret the measure in such a way that someone like Zuckerberg would be taxed as if he owns two-thirds of the company, based on his voting power, rather than based on the smaller percentage he owns in shares (which is still valued at over $200 billion).
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Loudly sounding alarms on this is Garry Tan, the San Francisco venture capitalist and CEO of Y Combinator who often opposes progressive causes in California. He said in January that the billionaire tax would “confiscate” as much as 50% of the wealth of some billionaires, like Zuckerberg or like Page and Brin, who own 10 times the voting shares in Alphabet that they do actual stock.
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The architects of the wealth tax proposal have responded to these claims, calling them “misinformation” in an open letter first obtained by SFGATE.
“Any claim that holders of voting or control shares in public companies will be taxed beyond the fair market value of their shares is simply false,” write tax policy professors Brian Galle from UC Berkeley, Darien Shanske from UC Davis and David Gamage from the University of Missouri. All were tapped by SEIU-UHW, the health care union behind the proposal, to craft the language of the measure.
The letter, plainly addressed to “California billionaires,” calls any fears that these shareholders would have to sell a portion of their stocks “absurd.”
“We write this letter to respond to questions and misinformation that have been raised about the valuation of ‘voting’ or ‘special control’ shares,” the letter reads. “… The misrepresentation spread by individuals online may have created confusion for those who would be affected.”
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“Taxpayers will not be taxed on more than the actual market value of their holdings,” it continues.
Billionaires hold wealth in a variety of forms, the letter goes on to explain, and the wealth tax explicitly provides specific valuation rules for certain categories of assets and businesses. It says the 5% tax on a billionaire’s net worth is a “relatively modest tax” and will “serve a vital goal”: stabilizing California’s health care system. SEIU-UHW has said revenue from the tax will prevent hospital and emergency room closures and help provide Medi-Cal funding that has been lost due to Trump administration budget cuts.
The proponents cite Forbes, which estimates that 72% of the wealth of California’s billionaires is in the form of publicly traded stock. They say that if Zuckerberg sells 5% of his stake in Meta to pay off the tax, he will still be left with 13% ownership of Meta. They said in a February report that “nothing of substance changes for the business operations of Meta” under the tax proposal.
“Therefore, the one-time billionaire tax will simply slightly dilute the business stakes of billionaire taxpayers and only if they choose to pay the tax in this way,” the professors said.
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Galle, the UC Berkeley professor and one of the architects of the bill, told SFGATE in a phone call that billionaires should not be losing sleep over this. He said taxpayers would be taxed only at the “fair market value” of the stock they own, not for their voting shares.
“No one is going to be subject to voting shares. Garry obviously has no real arguments on the merits, so he is trying to cook up these fake arguments,” Galle said, referring to Tan.
As for Tan’s other issue — that the wealth tax is “poorly defined and designed to drive tech innovation out of California” — the crafters have continued to dispute that idea, saying in the February report that only those who are already billionaires will be impacted by the tax. “Any entrepreneur who is not yet a billionaire will not have to pay anything,” the report declares.
The CEO of Nvidia, Jensen Huang, stood apart from most California tech leaders when he previously said he was “perfectly fine” with the tax.
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Jared Walczak, a senior fellow at the California Tax Foundation, a nonprofit promoting tax policy, who calls the proposal “poorly drafted,” says Huang’s outlook could be related to the fact that the percentage of overall stock he owns in Nvidia and the percentage of super shares is the same — 3.8% — so his taxable net worth would not exceed that value no matter how super-voting shares are valued.
“If the proposal passes this November, it will be up for interpretation by the California Franchise Tax Board, who will be implementing the new tax law,” Walczak said in a phone interview with SFGATE. He said he is concerned that the proposal could end up being misinterpreted and over-taxing about 80 billionaires who own large voting shares of their companies.
“I accept that they as drafters did not intend to tax public equity under a voting shares measure,” Walczak continued. “I believe them, that it wasn’t their intent,” he said, but argued there is no way within the law to control that potential interpretation.
SFGATE reached out to the California Franchise Tax Board, which would be the entity in charge of collecting the new tax come 2027, for clarification about how it would interpret the measure as written. Spokesperson Andrew LePage said the board does not comment on proposed ballot initiatives.
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In 2020, the same team of tax policy professors helped to write the text for a California wealth tax proposal that was co-sponsored by now-Attorney General Rob Bonta. That proposal would have implemented an annual 0.4% tax on more than 30,000 of the richest Californians, according to Forbes. The trio also helped craft another wealth tax introduced by Assemblymember Alex Lee in 2024, which would have levied an annual tax of 1% on Californians with a net worth that exceeds $50 million, and 1.5% on those worth over $1 billion. Both proposals failed in the state legislature.
Galle downplayed the risk of misinterpretation to SFGATE. He said that if, hypothetically, a billionaire filer challenges the tax board’s interpretation of their return next year, a judge will be relying on public statements from the proponents over how they intended the law.
“That last word will be our word,” he said.
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