Nothing brings tech titans together like taxes. <\/p>\n
This week, as the specter of a California\u00a0 \u201cbillionaire tax\u201d<\/a> 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)<\/a>, Anduril founder Palmer Luckey could be \u201cscrewed for life,\u201d (opens in new tab)<\/a> and (should you believe \u201cAll-In\u201d host David Friedberg (opens in new tab)<\/a>) California will slide into \u201cthe darkest of human fantasy \u2014 socialism.\u201d<\/p>\n But what does the proposal actually say? Who would have to pay up? Is it time to start addressing your neighbors as \u201ccomrade\u201d? Here\u2019s a cheat sheet to cut through the panic.\u00a0<\/p>\n What is this tax measure?\u00a0<\/p>\n 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 \u2014 that\u2019s 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.)<\/p>\n 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.<\/p>\n Whoa, is this thing for real?\u00a0<\/p>\n Hold your horses. We\u2019ve got a long way to go: The initiative was submitted\u00a0in October, but it\u00a0 will need to earn 874,641 signatures \u2014 about 4% of registered voters in California \u2014 to qualify for the November ballot. If it appears on the ballot, it will need a simple majority to pass.<\/p>\n Who\u2019s pushing for it? <\/p>\n 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\u2019s representative in Congress. \u201cA billionaire tax is good for American innovation which depends on a strong and thriving American democracy,\u201d Khanna wrote on X.\u00a0 (opens in new tab)<\/a><\/p>\n 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)<\/a> in 2011. So Khanna\u2019s support for the initiative has ruffled some feathers in the Valley.\u00a0<\/p>\n Who really, really doesn\u2019t want it?\u00a0<\/p>\n 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)<\/a>.\u00a0<\/p>\n \u201cYou can\u2019t isolate yourself from the 49 other states,\u201d Newsom said (opens in new tab)<\/a> this month. \u201cWe\u2019re in a competitive environment. You\u2019ve got to be pragmatic about it.\u201d\u00a0<\/p>\n Wait, what about paper billionaires \u2014 those people who are worth 9 zeros only because of startup equity?\u00a0<\/p>\n 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\u2019s princess could be tomorrow\u2019s toad. Any of the darlings could fail in the next few years \u2014 but if the tax measure passes, the founders would conceivably still be on the hook for millions.\u00a0\u00a0<\/p>\n The initiative makes an effort to account for this possibility, with some fancy math about valuations. But none of that soothes Silicon Valley. \u201cIf it passes, the net effect will only be the destruction of the SV startup ecosystem,\u201d Replit founder Amjad Masad wrote on X. (opens in new tab)<\/a>(Replit is valued at more than $3 billion.)\u00a0<\/p>\n Khanna has tried to address those concerns. \u201cI oppose capital gains on unrealized gains,\u201d he wrote (opens in new tab)<\/a>. \u201cI support a 1-2 percent wealth tax on established billionaires with workarounds for founders who have illiquid assets and unprofitable companies.\u201d\u00a0\u00a0<\/p>\n Couldn\u2019t the billionaires just move to another state?\u00a0<\/p>\n 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.\u00a0<\/p>\n 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)<\/a> The same report said Thiel has considered opening an office for his firm, Thiel Capital, outside of California.<\/p>\n But moving assets and residency can be difficult. Billionaires tend to have deep roots and wealth tied up locally.\u00a0It 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.\u00a0\u00a0\u00a0<\/p>\n But c\u2019mon! California is where the future happens. Would all those billionaires really just leave?\u00a0<\/p>\n That\u2019s 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\u2019s fortune.\u00a0\u00a0<\/p>\n