California is flirting with a policy idea so aggressively stupid it reads like parody, except it isn’t. It’s drafted law; it’s real. And even if it never passes, the damage is already done.
The proposed “Billionaire Wealth Tax” ballot measure is not merely a tax and it’s far more than California’s tech tax; it is an explicit declaration that the state no longer understands property rights, incentive structures, or how modern innovation emerges. Hopefully, there mere proposal of it signals to every founder, investor, and operator that California views their ownership, control, and upside not as earned value, but as a public resource to be harvested when politically convenient.
As Mike Solana, CMO of Founders Fund, shared in Pirate Wires, a post-it note to every economic development office in America:
“The architects of California’s ‘Billionaire Wealth Tax’ ballot proposition quietly amended language in their proposal which, if successful, would permanently end the concept of founder-controlled startups in the state — a technology industry kill switch.”
This is not hyperbole; the amendment targets concentrated ownership itself – not consumption. not income, and not even capital gains at the moment of liquidity; it targets retained ownership, the very mechanism that allows founders to take long-term risk, resist short-term extraction, and build category-defining companies instead of financialized husks.
You don’t get Google, DoorDash, Stripe, Airbnb, or SpaceX by forcing founders to sell control early to satisfy tax liabilities on unrealized wealth. You get mediocrity. You get consultants. You get rent-seekers. You get Delaware C-corps with Cayman Island wrappers and operational headquarters anywhere but California.
The most important point gets lost in the ongoing debate of the merit or stage seemingly set to enable Gavin Newsome to swoop in as a savior as he readies a White House run: whether the tax passes is almost irrelevant. Drafting it at all tells founders everything they need to know about the governing philosophy of the state.
Article Highlights
The trillion-dollar exit nobody wants to talk about
The predictable response is denial, “They won’t really leave,” “They need California,” or “This is just about billionaires.”
That fantasy collapses under data.
Etienne de la Boetie has documented that the total wealth that has already left California now exceeds $1 trillion. That’s migration data, tax filings, and asset relocation aggregated over the last several years.
This didn’t start with the so-called billionaire tax. It started with hostility to ownership, casual contempt for capital formation, and a belief that innovation is a static resource rather than a fragile, compounding process. The tax proposal simply confirms the trend and accelerates it.
California legislators appear genuinely surprised that people respond to incentives. This is remarkable given that incentive response is the core operating principle of venture-backed innovation. Founders don’t take asymmetric risk for applause. They do it because ownership of upside compensates for the overwhelming probability of failure.
That is why the tax doesn’t “just hit the rich.” It annihilates the risk premium that justifies entrepreneurship in the first place. If the state claims your upside while leaving you fully exposed to downside, the rational response is exit – Not protest. Not negotiation. Exit.
Chamath Palihapitiya caught my attention:
“You all use Uber, DoorDash and every other tech innovation made here but now you want the creators of these services to go bankrupt doing it??
That math doesn’t math.
Everyone that is potentially touched by this will now leave and all that will result is a massive hole in California’s finances that you will be forced to fill.
Come Election Day, if this proposition lands on the ballot and succeeds as written, founders throughout the industry who haven’t already left California will not only be forced to sell control of their companies, many could go bankrupt. (Yes, literally).”
That last parenthetical matters because this isn’t figurative bankruptcy and it should reveal ignorance in office that concerns everyone. If you’re asset-rich, cash-poor, and forced to pay annual wealth taxes on illiquid equity, insolvency becomes a math problem, not a moral one. Hell, it is a moral one, because people are proposing doing these things and Americans keep electing them.
California has even been here before! It ignored the warning.
California has been broadcasting this attitude for decades.
Back in 2009, long before Uber, long before the modern tech backlash, Travis Kalanick wrote:
“CA has some of the highest tax rates in the country. With those high tax rates you’d think there would be fairly high quality services provided by the state. Unfortunately, those huge taxes provide services that have the lowest levels of quality in the country.”
That post aged like wine because high taxes were defensible when paired with some competent governance, improving infrastructure, and the predictability tech brought to California. What founders face now is high extraction paired with regulatory chaos, ideological hostility, and performative politics.
At some point, founders stop asking how much they owe and start asking why they’re still there.
When innovators refuse to govern, fools do it for them
This brings us to the most uncomfortable part of the conversation I want to have; the most important.
John Loeber makes the case plainly in his plea for Silicon Valley to enter politics, “Silicon Valley figures have historically avoided politics… They have instead stuck to donating and delegated the thick-skinned job to representatives like Ro Khanna, who have unfortunately shown that they cannot be trusted to represent these constituents… we cannot pay someone else to do the job, but we must do it ourselves.”
He goes further, and this is the line every founder should sit with:
“It is an unthinkable sin that the work of the greatest innovators and savviest capital allocators of our time is given as tribute, placed on the high altar of government, only to be frittered away on waste and fraud.”
This is not a partisan argument; it’s a governance argument. When the people who actually understand systems, incentives, scale, and tradeoffs refuse to engage in power, power gets exercised by people who see the economy as a spreadsheet to be raided for votes (or wealth).
I’ve been making the same plea from a startup economics perspective for years. Startups are not getting crushed by competitors. They’re getting crushed by politics, regulation, and policy written by people who have never built anything fragile. Entrepreneurs need to treat government engagement as a core function, not a charitable afterthought, to ensure that ignorance in policy won’t result in preventing the very solution you’re trying to bring to market. It’s also why I’ve warned repeatedly that intellectual property under government or university (publicly funded) control needs to be reframed as public goods to be used rather than private property to be controlled. Governments are often upside-down in understanding this sector of the economy and that bass-ackwards approach to the slice of humanity that creates jobs and wealth, actively destroys both.
The California wealth tax proposal isn’t an anomaly; it’s the logical outcome of a system where innovators abdicated governance and hoped donations would substitute for representation.
Exit, Stage Texas: Structurally Better Positioned to Lead
Please tell me you’re not buying the narrative that people are moving into Texas because it’s more affordable. If we’re being honest about it, Texas still struggles with a lack of experienced startup mentors, a venture capital gap, and difficulty hiring people who exhibit the personality and cultural tendencies of entrepreneurs; these are real problems some of us are working to overcome. Still, let’s shift from California’s latest glaring violation and reflect on Texas’s opportunity.
A state such as Texas offers legal clarity, respect for ownership, and a political culture that (for now, granted) still understands that wealth creation precedes wealth redistribution. That matters more than any incentive package.
Texas already dominates on population growth, employment growth, business formation, and net domestic migration. According to U.S. Census Bureau and IRS migration data, Texas has been the largest net gainer of both people and adjusted gross income for multiple consecutive years.
Founders are voting with feet and balance sheets.
More importantly, Texas has begun aligning government, universities, investors, and founders around a shared understanding: innovation is a strategic asset, not a taxable windfall. When those actors coordinate, the state compounds advantages instead of eroding them.
This is precisely what Loeber is arguing for California to rediscover, and what Texas is already positioned to execute. Texas entrepreneurs: enter politics! A tech economy governed by people who respect property rights, understand incentives, and view founders as partners (the catalyst of jobs and wealth), rather than targets will win by default.
Texas doesn’t need to “steal” Silicon Valley and as I and many others have repeatedly reinforced, you don’t want to replicate Silicon Valley either! Hell, California is pushing it out… if you don’t buy into the concern about tax policy, at least take note of the fact that what they’re doing isn’t working as it did when unique circumstances created a temporary monopoly on the internet.
California is Choosing
Chamath bears repeating, “This proposed ‘Billionaire Tax’ will blow a massive hole in the California deficit and ruin the tech economy in California. The middle class will then be forced to pay for it if this passes because all the rich people are leaving! It’s mathematical at this point. Newsom needs to find a way to balance the budget and shelve this wealth tax from ever making it to the ballot.”
Mathematics doesn’t negotiate and capital doesn’t protest, it relocates.
The real question isn’t whether the state even stops this California tech tax. It’s whether founders elsewhere will recognize the warning early enough to avoid being next.
Do you want to build it under a government that sees ownership as a liability? California just answered it in draft legislation. The rest of the country should be paying attention.
Hm… Let’s break this down.
The key word here is “BILLIONAIRE”.
This post claims that the tax treats all ownership as fragile founder risk-taking, when the tax is aimed at ***extreme, durable concentration of wealth that is already insulated from downside.*** i.e., BILLIONAIRES
I know this might be confusing but Founders ? billionaires.
The post collapse early-stage founders, growth-stage CEOs, and ultra-high-net-worth individuals into one heroic class. In reality, the proposed thresholds are so high that they touch post-liquidity, post-optionality wealth—not people deciding whether to make payroll.
That’s the point: Ownership at billionaire scale isn’t a startup survival mechanism; it’s a store of political and economic power that compounds faster than wages, consumption, or realized income.
Let’s be real.
Also, not sure I’d be quoting Travis Kalanik on *anything*.
Also…
“Wealth creation precedes redistribution” is a slogan, not a system. Wealth creation also precedes public goods, legal enforcement, educated labor, and capital markets. California supplies all of these things, at scale — and yes, the supply of everything is bigger than it is in TX. Treating the state as a parasite rather than a co-producer is illogical.
California supported these billionaires in creating their wealth. For the most part, very few of them have returned the favor to the people of California. These bros didn’t create that wealth all by themselves, though they will loudly say otherwise.
Holly Roland I get why that distinction feels comforting, but it doesn’t hold up well in how venture-backed companies are built and governed. We see that pattern play out globally with the most significant companies a result of more ownership and direct control.
“Billionaire” isn’t a class of people separate from founders. It’s nothing more than a stage that emerges from retained ownership in illiquid companies (since we’re talking about asset ownership here, not cash). The proposal doesn’t tax consumption or realized gains; it targets ownership itself, which is precisely why Solana called it a kill switch. You can’t pretend that penalizing concentrated ownership doesn’t affect how founders structure companies long before liquidity, it absolutely does.
… This isn’t about someone deciding whether to make payroll tomorrow. It’s about whether it’s rational to retain control, delay liquidity, or build long-term when the state is signaling that unreleased equity will be treated as taxable inventory. That changes incentives for everyone.
Most founder wealth at that every level is overwhelmingly tied up in equity they cannot easily sell without losing control or triggering massive secondary consequences. Annual wealth taxes on illiquid assets don’t distinguish “paper value,” they force behavior.
And on Kalanick: you don’t have to like him to acknowledge that California’s tax mismatch has been a complaint for decades. Go to more extremes: Clinton or Trump, both clearly questionable, that doesn’t invalidate an observation or opinion they shared.
I mentioned Uber in the article, Uber made Texas a battle-ground state in policy, so it’s natural to include his relevant perspective pertinent to the larger point. I could do the same for Page and Brin who have said they’re leaving.
We can argue about redistribution. What’s not really debatable is that taxing unrealized, illiquid ownership undermines the very mechanism that produces the companies everyone claims to value.
This essay correctly describes what happens, capital exits rather than negotiates but misidentifies why. California’s problem isn’t hostility to founders; it’s institutional exhaustion under coordination pressure. When institutions can no longer process scale, speed, and complexity, they default to extraction behaviors that feel ideological but are actually structural. Capital doesn’t leave because taxes are high; it leaves because coordination has outpaced legitimacy. Asking founders to enter politics won’t reverse this, because politics is now downstream of coordination. Texas isn’t “better governed”, it’s just temporarily better aligned. That advantage will persist only until the same pressures arrive.
This is a thoughtful read, and I appreciate the way you’re framing the problem as systemic rather than purely ideological; that’s a useful lens, not a wrong one.
Where I’d gently push back is on the implication that this makes the tax proposal less consequential rather than more. Institutional exhaustion and coordination failure don’t negate incentive-driven behavior; they amplify it. When institutions lose the ability to process complexity, they reach for blunt instruments, and wealth extraction is one of the bluntest available. From the perspective of founders and capital allocators, the distinction between “ideological hostility” and “structural exhaustion” doesn’t materially change the decision calculus. The signal is still the same: ownership is no longer treated as something to be protected.
I also think the critiques of how this article is being positioned are interesting precisely because of their bias toward inevitability. If coordination pressure makes these outcomes unavoidable everywhere, then the only rational response for builders is to seek jurisdictions where alignment, legitimacy, and institutional capacity are still holding, even if temporarily. That’s not denial; it’s adaptive behavior. Capital doesn’t wait around to see whether a system recovers its coherence.
On founders entering politics, I’m not arguing that it’s a silver bullet or that it instantly reverses coordination collapse. The claim is narrower: when builders fully disengage from governance, the only voices shaping policy are those who experience the system abstractly, not operationally. That accelerates exhaustion rather than relieving it. Participation may not solve coordination limits, but absence guarantees misalignment.
And on Texas: I agree the advantage isn’t permanent. No advantage ever is. The point isn’t that Texas is immune to scale pressure, but that alignment still exists there now, between ownership, governance, and economic reality. That window matters. Systems don’t fail all at once; they fail when enough people decide the risk of staying exceeds the cost of moving.
California voters are likely to vote in favor of the wealth tax initiative. They will buy into the superficial pitch of the SEIU-UHW union campaign that “let’s make those rich billionaires pay their fair share to fund needed heath care for the California’s most vulnerable residents.”
Here are some arguments that might convince people to vote against the wealth tax.
1. Since waste, fraud, and abuse in Medi-Cal funding are unlikely to be substantially reduced by the California legislature, a repeated application of the wealth tax every five years will be the “go-to” fix. A one-time pot of money from a 5% wealth tax is likely to be exhausted by the State sooner rather than later.
2. The threshold wealth for the application of the California wealth tax could eventually be reduced over repeated applications of the tax to $10 million. We all know this tax would not be a one-time tax.
3. A one-time 5% wealth tax against California billionaires is likely to collect far less than the $100 billion its proponents claim. By one estimate, former California residents owning around $1 trillion in wealth have already left the state based on the fear of enactment, including the co-founders of Google.
4. The costs of administering and collecting the wealth tax could easily exceed $50-100 million annually. Billionaires caught in its clutches will hire armies of lawyers to litigate the validity of the tax for years. Even assuming that the tax survives legal challenges, there will be endless arguments by CPAs and expert witnesses over valuations leading to more costly litigation.
5. The loss of California income tax from high earning employees of tech companies that move out of California will eventually exceed the collections from a one-time application of the wealth tax.
6. Large scale forced sale of stock by founders of public companies like Apple, Meta, NVIDIA, Google, AirBNB, Uber, DoorDash, etc. could have significant negative impact on their stock values. This could end up financially harming the non-billionaire California residents that own these stocks directly and/or in their retirement accounts.
7. The number of new Venture Capital funded start-ups in California will be drastically reduced if the wealth tax is approved by voters. Indeed, the mere possibility that the tax might be passed by voters has likely already led to a reduction in new California tech start-ups.
8. The shortfall in Medi-Cal funding that the SEIU-UHW union is complaining about could be largely solved by denying free medical services to illegal aliens.
The strongest legal challenge to the validity of the California wealth tax appears to be that its retroactive application violates the 5th Amendment’s Due Process clause. However, this vulnerability can readily be avoided by only collecting the wealth tax from billionaires that were California residents on the date the proposition passes on November 3, 2026 rather than January 1, 2026. In that case, the short-term benefit of a reduced collection of say $30 billion in wealth taxes is far outweighed by the long-term harm to California’s high-tech tax base.