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.
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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.
