**Silicon Valley is Losing Its Mind Over California’s Proposed Wealth Tax (It’s Not Just the 5% Tax Rate)**
You might have noticed the recent exodus of billionaires from California, and wondered what’s behind the chaos. It’s not just the 5% tax rate, folks. According to a recent report, the proposed wealth tax would hit founders on their voting shares, not the actual equity they own.
Take Larry Page, for example. As the co-founder of Google, he owns around 3% of the company, but controls a whopping 30% of the voting power through dual-class stock. Under this proposal, he’d owe taxes on that 30%. For a company valued in the hundreds of billions, that’s not a rounding error. In fact, one SpaceX alumni founder would face a tax bill on the Series B stage of the company that would wipe out his entire holdings.
But David Gamage, a University of Missouri law professor who helped craft the proposal, thinks Silicon Valley is overreacting. “I don’t understand why the billionaires aren’t calling good tax lawyers,” he told The San Francisco Standard. He insists founders wouldn’t be forced to sell. Those with most of their wealth in private stock could open a deferral account for assets they don’t want taxed immediately – California would take 5% each time those shares are sold.
However, that’s small comfort. For startups that aren’t publicly traded, calculating valuations is “inherently difficult,” tax pro Jared Walczak told the Post. “These aren’t clear-cut – you can come to a very different conclusion not because of dishonesty.” And if the state disagrees with your appraisal, it’s not just the company on the hook – the state could also penalize the person who calculated the valuation. Even with other valuation determinations, founders would still face massive tax bills on the control they hold but the wealth they haven’t realized.
All this is part of a larger debate around a proposed poll initiative that would impose a one-time 5% tax on anyone worth over $1 billion. The union pushing the initiative argues it’s necessary to offset the deep cuts to healthcare that President Trump signed into law last year. The tax would apply retroactively to anyone living in California as of January 1, 2026.
But the resistance is fierce and bipartisan. A recent report in the Wall Street Journal revealed that Silicon Valley elite have formed a Slack channel called “Save California” that includes everyone from Trump’s crypto czar David Sacks to Kamala Harris mega-donor Chris Larsen. They’ve called the proposal “Communism” and “poorly defined.” Some are taking just-in-case measures – Larry Page has reportedly spent $173.4 million on two Miami waterfront properties, and Peter Thiel’s firm has leased Miami office space.
Even Governor Gavin Newsom is fighting it. “This can be defeated, there’s no question in my mind,” he told the New York Times. “I’ll do what I have to do to protect the state.”
The proposal needs 875,000 signatures to make November’s ballot, where it would need a simple majority to pass. For now, the union isn’t backing down. “We’re simply trying to keep emergency rooms open and save patient lives,” said executive committee member Debru Carthan to the Journal. “The few who left have shown the world just how outrageously grasping they honestly are.”
The battle over California’s proposed wealth tax is far from over.
