A proposed wealth tax targeting billionaires in California has sparked intense pushback from tech founders in the state, with some preparing to leave if the tax becomes law. Prominent conservative tech entrepreneur Palmer Luckey explains, “One market correction, nationalization event, or prohibition of divestiture (not at all uncommon during wartime) and I am screwed for life.”
Fortune reports that a proposed wealth tax aimed at billionaires in California has yet to qualify for the state’s ballot, but it has already triggered a wave of criticism from tech founders who warn of its potential consequences. The proposal, which calls for California residents worth more than $1 billion to pay a one-time tax equivalent to five percent of their assets over five years, has prompted some high-profile tech figures to consider leaving the state.
According to the New York Times, conservative venture capitalist Peter Thiel and Google cofounder Larry Page are among those looking into relocating in case the tax becomes law. Rep. Ro Khanna (D-CA), who represents part of Silicon Valley, drew attention to the story on X and echoed President Franklin Roosevelt’s sentiment, saying, “I will miss them very much.” Commenters were quick to point out that Khanna previously opposed taxes on unrealized capital gains.
Khanna’s support for the wealth tax unleashed a flood of negative reactions from the tech community. Palmer Luckey, cofounder of defense tech startup Anduril, warned that the tax would force founders to sell significant portions of their companies to pay for “fraud, waste, and political favors for the organizations pushing this ballot initiative.” He expressed concern that if he and his wealthy peers cannot come up with billions of dollars in cash to pay the tax, the state could seize their homes and garnish their wages.
“One market correction, nationalization event, or prohibition of divestiture (not at all uncommon during wartime) and I am screwed for life,” Luckey posted on X.
A key issue raised by the tech community is how the potential wealth tax might treat paper profits from stock gains and stakes in companies that have not gone public, which is a common form of compensation among startups that have yet to become profitable. Figma cofounder and CEO Dylan Field pointed out that founders and potentially early employees could be subject to the wealth tax but would not be able to use company stock to pay it. Some founders may also face capital gains taxes, resulting in a “double tax event.”
Field also highlighted the challenges founders may face if their startup has an unsuccessful year while still being liable for the wealth tax. They may be forced to lower their startup’s valuation through a “down round,” making it more difficult to attract talent and investors, take out loans they may struggle to repay, or leave California altogether.
“Silicon Valley startups (ironically) follow the herd. Once enough respected companies/founders establish a pattern, other startups will follow, even if the wealth tax does not apply to them yet,” Field noted on X.
Dave Friedberg, cofounder and CEO of Ohalo Genetics, argued that the wealth tax amounts to an “organized government seizure of private property from citizens” who have already paid other taxes that can total 53 percent in California. He warned that the tax flirts with socialism and represents “a slippery slope that has never gone anywhere good.”
Garry Tan, CEO of tech startup accelerator Y Combinator, told the New York Post that the wealth tax would drive capital out of the state, hurt innovation, and eventually weaken support for healthcare services. “This measure would cause a stampede of unicorns out of California to other states, which would reap the benefits of entrepreneurs, technology and jobs that California enjoys now,” he added.
Read more at Fortune here.
Lucas Nolan is a reporter for Breitbart News covering issues of free speech and online censorship.
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