Elon Musk’s Lawyer Critiques Proposed California Wealth Tax

Elon Musk’s attorney, Alex Spiro, has joined the ranks of billionaires voicing concerns about a potential wealth tax in California. He’s urging Governor Gavin Newsom to reconsider the proposal, fearing it could drive wealthy residents away from the state.

In a letter dated December 11, Spiro argued that the tax would “trigger an exodus of capital and innovation from California.” He noted that clients of his, including a billionaire who chose to remain anonymous, have expressed intentions to leave if the tax is enacted.

Spiro, who has been Musk’s lawyer for years, mentioned that he represents an entity currently engaged in shareholder litigation. He warned Newsom that failing to prevent the proposed 5% wealth tax could lead to legal challenges and unfavorable publicity.

He conveyed that clients want to stay in California to support the local economy but would feel compelled to leave if their assets are, in his view, unconstitutionally taken. “We hope for a political resolution rather than lengthy litigation,” he added.

Interestingly, even Newsom has publicly opposed the wealth tax. This proposed tax, pushed by SEIU and the United Healthcare Workers West union, requires about 870,000 signatures to make it onto the November 2026 ballot. It aims to tax around 200 billionaires, targeting those with net worth of at least $1 billion by 2026. Supporters argue that funds raised would help offset federal budget cuts affecting healthcare and education.

Newsom has commented on the initiative, noting that there’s minimal signature collection happening. “The wealth tax is largely opposed by the majority of workers, and I think the consensus I’ve heard is against it,” he said at the New York Times’ Dealbook Summit on December 3.

While Newsom lacks the authority to stop the tax outright, Spiro suggested various strategies to counteract it, including blocking signature collections or campaigning against its passage to keep capital in California.

It’s yet unclear who specifically Spiro represents in his letter. Besides Musk, he also works with other high-profile clients like Jay-Z and Robert Kraft. Among California billionaires who might consider leaving are Larry Page and Peter Thiel, who could face substantial financial impacts from the proposed tax.

Musk previously founded several companies in California before relocating to Texas in 2020. His relationship with the state has been fraught, particularly after he defied lockdown measures during the pandemic. Newsom stated he wasn’t concerned about Musk’s departure at that time, emphasizing their commitment to mutual goals.

The two have had a contentious dynamic recently, with Musk criticising California’s policies. Notably, Musk and Newsom exchanged barbs after a comment made by Newsom’s office regarding Musk’s family situation, which Musk contested.

In his letter, Spiro declared the billionaire tax amounts to an illegal confiscation, warning it might force taxpayers to liquidate their assets. He argued that for a short-term gain, such an initiative could lead to significant long-term economic drawbacks.