{"id":136320,"date":"2026-01-16T15:48:15","date_gmt":"2026-01-16T15:48:15","guid":{"rendered":"https:\/\/www.newsbeep.com\/us-ca\/136320\/"},"modified":"2026-01-16T15:48:15","modified_gmt":"2026-01-16T15:48:15","slug":"fine-print-in-californias-wealth-tax-roils-silicon-valley","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/us-ca\/136320\/","title":{"rendered":"Fine print in California’s wealth tax roils Silicon Valley"},"content":{"rendered":"

California\u2019s wealth tax is roiling Silicon Valley <\/a>\u2014 and it isn\u2019t even the 5% rate that has techies furious and seriously contemplating leaving the Golden State. It\u2019s what\u2019s in the fine print.<\/p>\n

The proposed \u201cbillionaire tax\u201d\u00a0treats voting shares as if they were actual ownership, taxing founders on control they hold rather than wealth they actually possess. It punishes innovators for maintaining control of their companies and discourages them from launching startups where they have a majority say.<\/p>\n

\u201cThe treatment of voting shares for founders is so onerous it\u2019s unclear if this was intended,\u201d Jared Walczak, a state tax expert at the Tax Foundation, told me. \u201cThere are significant consequences even if they\u2019re unintended.\u201d<\/p>\n

\u201cThe treatment of voting shares for founders is so onerous it\u2019s unclear if this was intended,\u201d Jared Walczak, a state tax expert at the Tax Foundation, told me, of California\u2019s proposed wealth tax. Newport Coast Media \u2013 stock.adobe.com<\/p>\n

The issue affects every tech founder who retained control through dual-class stock \u2014 which is a key part of the reason Google co-founders Larry Page and Sergey Brin left Google in 2019.<\/p>\n

While Page holds around 3% of Google\u2019s shares, he controls about 30% of its voting power. Under the proposed tax, he\u2019d owe on the 30% rather than the much smaller percentage of the company he actually owns.<\/p>\n

For startups, it is both expensive and extremely complicated to calculate the tax burden. \u201cFor a startup that isn\u2019t publicly traded, calculating a valuation is inherently difficult,\u201d Walczak said. \u201cThese are not clear cut \u2014 you could come to a very different conclusion not because of dishonesty.\u201d<\/p>\n

Billionaires like Larry Page would be taxed on their voting shares rather than their wealth under a proposed California law. AP<\/p>\n

If the state disagrees with the way a company calculates its valuation, it\u2019s not just the company that is on the hook but the person who calculated that valuation \u2014 and the state is threatening to slap a penalty on the person who miscalculated.<\/p>\n

Joe Malchow, founding partner at Bay Area venture capital firm Hanover, told me he\u2019s already seeing how\u00a0devastating the proposed tax would be for young founders poised to solve some of California\u2019s biggest problems, like energy shortages.<\/p>\n

\"\"<\/p>\n

This story is part of NYNext<\/a>, an indispensable insider insight into the innovations, moonshots and political chess moves that matter most to NYC\u2019s power players (and those who aspire to be).<\/p>\n

\u201cLast week we launched a company of SpaceX alumni building powerful grid-forming technologies that unburden California\u2019s grid,\u201d he said. \u201cWe granted the founder stock with 10 votes for every share because that is what you do when you\u2019re building something that helps millions of people but might hurt a few entrenched business interests.\u201d<\/p>\n

The founder\u2019s voting shares represent 30% control of a company valued in the billions \u2014 meaning the tax would hit him on billions of dollars in phantom wealth, even though he owns a much smaller economic stake and hasn\u2019t sold a single share.<\/p>\n

Page\u2019s co-founder Sergey Brin would also be hard hit. Bloomberg via Getty Images<\/p>\n

\u201cAt the Series B, this founder would be taxed an amount that vitiates his entire holdings,\u201d Malchow added. \u201cLike homeowners in 2008, he would instead hand over the keys and walk away. Actually, handing over the keys and walking away is exactly what his lower level employees would then have to do with their actual homes.\u201d\u00a0<\/p>\n

Garry Tan, who runs Y Combinator, the most prominent startup incubator in the state, went viral earlier this week for calling out the fact<\/a> that Larry and Sergey \u201ccan\u2019t stay in California since the wealth tax as written would confiscate 50% of their Alphabet shares.\u201d He added the proposal was \u201cpoorly defined and designed to drive tech innovation out of California.\u201d<\/p>\n

The tax won\u2019t hit the ballot until November, but it would be levied retroactively based on residency as of January 1, 2026. That fact led some founders of trillion-dollar companies to flee early, chilling the launch of new businesses. Since January 1, an estimated $1 trillion has left the state<\/a> with reports that both Page and Brin have left.<\/p>\n

Gary Tan says the proposal is \u201cpoorly defined and designed to drive tech innovation out of California.\u201d Bloomberg via Getty Images<\/p>\n

Some notable California founders haven\u2019t expressed disapproval \u2014 Nvidia founder Jensen Huang told Bloomberg TV he would be \u201cperfectly fine\u201d if the tax is enacted \u2014 but even left-wing figures like Governor Gavin Newsom have vowed to stop it<\/a>.<\/p>\n

\u201cBusiness founders value control of their business just as much, if not more, than their wealth,\u201d Walczak said. And the idea of the state going after them for both? \u201cIt\u2019s hard to imagine a more potent mix of factors to incentivize them to leave.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"California\u2019s wealth tax is roiling Silicon Valley \u2014 and it isn\u2019t even the 5% rate that has techies…\n","protected":false},"author":2,"featured_media":136321,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6],"tags":[387,7,9,8,457,57041,69443,69444,1694,9560],"class_list":{"0":"post-136320","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-california","8":"tag-business","9":"tag-california","10":"tag-california-headlines","11":"tag-california-news","12":"tag-gavin-newsom","13":"tag-larry-page","14":"tag-nynext","15":"tag-sergey-kovalev","16":"tag-taxes","17":"tag-wealth"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/posts\/136320","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/comments?post=136320"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/posts\/136320\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/media\/136321"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/media?parent=136320"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/categories?post=136320"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/tags?post=136320"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}