A proposed wealth tax in California targeting billionaires has drawn significant backlash from tech leaders in the state. Some, like Palmer Lackey, a notable conservative entrepreneur, fear the consequences if the tax goes into effect, stating, “One market correction, one nationalization event, one divestment ban (which can happen during wartime) and I’m in big trouble for life.”
While the wealth tax hasn’t yet made it onto California’s ballot, it has already ignited a strong response from tech founders who are concerned about its implications. The plan would require residents with a net worth exceeding $1 billion to pay a one-time tax amounting to 5 percent of their wealth over five years. This proposal has led some notable figures in technology to contemplate relocating out of the state.
Peter Thiel, a conservative venture capitalist, and Larry Page, a co-founder of Google, are reportedly among those considering a move if the tax is enacted. Representative Ro Khanna, who serves parts of Silicon Valley, pointed to these concerns and echoed FDR by saying, “We’re going to miss them deeply.” Critics noted that Khanna had previously opposed taxes on unrealized capital gains.
Following Khanna’s statement, a wave of negative feedback emerged from the tech sector. Palmer Lackey, who co-founded a defense tech startup, expressed worries that the wealth tax could force business owners to sell significant parts of their companies just to pay off taxes that he labels as driven by “fraud, waste, and political favors.” He fears that without the liquidity to cover these taxes, state authorities could seize their homes or even garnish their wages.
“One market correction, one nationalization case, one sale ban (again, something not uncommon during wartime) and I’m done for,” Lackey shared on X.
A major issue raised by tech leaders is how the proposed wealth tax would treat profits tied to stock ownership, especially in private companies, which is a typical form of compensation in startups yet to record profits. Dylan Field, co-founder and CEO of Figma, noted that while founders could face a wealth tax, they wouldn’t be able to liquidate company stock to meet that obligation. He also indicated that founders might encounter capital gains taxes, leading to a situation of “double taxation.”
Field further pointed out that if a startup had a challenging year while facing a wealth tax, founders might have to reduce the company’s valuation, impacting their ability to attract talent or investment and possibly prompting them to flee the state altogether.
“Silicon Valley startups tend to follow established patterns. Once a well-respected entity sets a precedent, many others will likely follow suit, even if the wealth tax hasn’t taken effect yet,” Field observed on X.
Dave Friedberg, co-founder and CEO of Ohallo Genetics, characterized the wealth tax as a “systematic government seizure of private property,” arguing that citizens who already face taxes amounting to 53% in California shouldn’t have to endure this additional burden. He warned that the tax contradicts principles of socialism and represents a dangerous trend.
Garry Tan, CEO of Y Combinator, stressed that a wealth tax would drive investments out of the state, inhibit innovation, and lessen support for essential services. He remarked, “This will encourage unicorns to leave California for other states, taking with them the entrepreneurial and technological advantages that California currently enjoys.”
