LOS ANGELES (AP) — A proposed billionaires’ tax in California has ignited a political uproar in Silicon Valley, with tech titans threatening to leave the state while Democratic Gov. Gavin Newsom maneuvers to defeat a levy that he fears will lead to an exodus of wealth.
A technology mecca, California has more billionaires than any other state — a few hundred, by some estimates. Nearly half its personal income tax revenue, a financial backbone in the nearly $350 billion budget, comes from the top 1% of earners.
A large health care union is attempting to place a proposal before voters in November that would impose a one-time 5% tax on the assets of billionaires — including stocks, art, businesses, collectibles, and intellectual property — to backfill federal funding cuts to health services for lower-income people that were signed by President Donald Trump last year.
In a state with a vast gap between rich and poor, the plan has resulted in a tangle of competing interests at a time when both Democrats and Republicans are struggling to respond to economic anxiety driven by rising costs ahead of this year’s midterm elections.
An online war of words has tech leaders pondering a hollowing out of Silicon Valley, with millions of dollars flowing to political committees engaged in the fight. That includes $3 million from billionaire Peter Thiel, a founder of PayPal, to a committee tied to a business group opposing the tax.
However it’s not clear if the proposal will make the ballot, with more than 870,000 petition signatures required for it to qualify.
Threatened Exodus
Although the tax would affect only a minuscule slice of California’s roughly 39 million residents, it would siphon money from an immense pool of wealth. It would apply retroactively to billionaires living in the state as of Jan. 1.
At least 25 billionaires listed among Forbes magazine’s 2025 rankings of the world’s 500 wealthiest people either lived in California or had some significant ties to the state. Determining whether they were full-time residents or just frequent visitors could be contentious, given many own property elsewhere.
“You are really playing with fire with this one,” said Aaron Levie, CEO of Silicon Valley company Box, worried that the proposed tax would drive entrepreneurs to seek business-friendly states.
Even liberal-leaning tech pioneers would “find it absurd just on pure economic and structural grounds,” Levie noted, adding that the tax is misguided.
Governor's Battle
Newsom has long opposed state-level wealth taxes, arguing they would negatively impact California's economy. Currently facing a budget deficit, he is eager to block the proposal from reaching the ballot.
Political analysts warn that an exodus of billionaires could result in significant tax revenue losses for the state.
Divided Democrats
This proposal has created a major rift in the Democratic Party between moderate and progressive factions. Supporters like Vermont Senator Bernie Sanders endorse the plan as a necessary measure to address income inequality, while political discord grows within the party.
The California Business Roundtable, opposing the tax, warns it will decimate the state economy and artists families. Meanwhile, proponents argue it's a necessary response to the ongoing healthcare funding crisis.
A Challenging Climate
California's high cost of living and stringent regulations are already seeing tech leaders move their businesses and residences elsewhere. Reports indicate that high-profile billionaires like Elon Musk are shifting assets out of California amid economic pressures, illustrating the growing concern over the state's business climate.
