A proposed 5 percent wealth tax on billionaires in California is facing fierce resistance from crypto executives and tech founders who warn it could backfire badly.
Quick Summary – TLDR:
- California’s Billionaire Tax Act proposes a one-time 5% tax on wealth over $1 billion.
- The tax would also apply to unrealized gains, sparking concerns from tech and crypto leaders.
- Critics argue the measure would push entrepreneurs and capital out of the state.
- Supporters say the tax could fund public services like healthcare, childcare, and education.
What Happened?
The 2026 Billionaire Tax Act, backed by a powerful healthcare union, proposes a one-time 5 percent levy on billionaires’ wealth, including unrealized capital gains. While intended to fund critical social programs, the plan has drawn sharp criticism from some of California’s most influential tech and crypto voices who say it could damage the state’s innovation economy.
Crypto and Tech Leaders Sound the Alarm
Prominent crypto leaders and venture capitalists have been unusually vocal in condemning the tax. Kraken co-founder Jesse Powell did not mince words, calling the proposal “the final straw” and warning that billionaires would flee, taking with them their philanthropy, spending, and jobs.
A 5% theft of unrealized gains and assets taxes were already paid on is about the most retarded thing I’ve ever heard. I promise you this will be the final straw. Billionaires will take with them all of their spending, hobbies, philanthropy and jobs. Solve the waste/fraud issue. https://t.co/DKcNWni2kB
— Jesse Powell (@jespow) December 28, 2025
Bitwise CEO Hunter Horsley raised alarms over California’s poor track record with spending public funds, referencing a December audit that flagged unaccounted-for expenditures. He questioned whether handing over more taxpayer money was wise.
$70 billion of fraud and wasted taxpayer money.
— Hunter Horsley (@HHorsley) December 28, 2025
But what Ro has a plan for is not pulling the fire alarm and fixing this. Rather what he’s been spending time on is a new private citizen asset confiscation to have more money for the government.
Politicians have long forgotten… https://t.co/HRVzF9malT
Nic Carter, founding partner at Castle Island Ventures, said the tax could send a dangerous signal to investors. “It seems to me that capital is more mobile than ever, and one-time wealth taxes are a signal to capital like a sovereign default that more can be expected in the future,” he posted on X.
I generally like Ro and have interacted with some of staff who have always been fantastic, but I do wonder – have they done an analysis of capital mobility in response to wealth taxes? It seems to me that capital is more mobile than ever, and “one time” wealth taxes are a signal…
— nic carter (@nic_carter) December 28, 2025
Fredrik Haga, co-founder of Dune, offered a warning from Europe. He cited Norway’s failed wealth tax, which led to a mass exodus of wealthy individuals and didn’t bring in the revenue expected. He said.
Founders Say It Could Cripple Startups
California startup founders are equally alarmed. Palmer Luckey, cofounder of Anduril, blasted the tax as a threat to entrepreneurs, saying it would force them to sell parts of their companies just to pay the state. “One market correction, nationalization event, or prohibition of divestiture and I am screwed for life,” he warned.
Dylan Field, cofounder and CEO of Figma, added that startup founders and early employees could be double-taxed, since the wealth tax would apply to paper profits from shares that can’t be easily sold.
Worse still, Field noted that even companies having a bad year could be forced into down rounds, hurting their appeal to investors and talent. He cautioned that if a few respected companies start to leave, others would likely follow, even if the tax didn’t yet apply to them.
Lawmaker Defends the Proposal
Despite the opposition, Representative Ro Khanna, a Democrat from California’s 17th Congressional District, has strongly defended the plan. In a series of posts on X, he argued that billionaires should contribute more and that the revenue could support childcare, housing, and education.
Khanna even responded sarcastically to news that Peter Thiel and Larry Page might leave the state, saying “I will miss them very much,” referencing President Franklin D. Roosevelt.
Khanna believes that reinvesting tax revenue into public services will strengthen California’s innovation ecosystem rather than hurt it.
What Comes Next?
The tax is not law yet. The proposal, submitted by the Service Employees International Union-United Healthcare Workers West, still needs 875,000 signatures to qualify for the November 2026 ballot. If it passes, billionaires would have to pay either upfront or over five years with interest.
But the backlash has already begun shaping public debate. As more tech leaders weigh in, the issue could become a flashpoint in California’s ongoing conversation about wealth, innovation, and inequality.
SQ Magazine’s Takeaway
I get where both sides are coming from. On one hand, there’s a real need to fix our crumbling public systems. On the other hand, this tax feels like it was cooked up without understanding how startups and innovation actually work. Asking founders to pay taxes on money they don’t even have in cash? That’s not just unfair, it’s dangerous. If California wants to keep its edge, it should be smarter about balancing ambition with economic reality. Otherwise, we might watch the next generation of innovators build their empires somewhere else.
