Why Silicon Valley is truly considering leaving California (and it’s not because of the 5%)

California’s Proposed Billionaire Tax: What’s Really Fueling the Debate?

There’s been a lot of speculation about why so many billionaires are leaving California, but the real concern isn’t just about a 5% tax rate. As recently reported by the New York Post, the new wealth tax proposal targets company founders based on their voting shares rather than their actual ownership stakes.

Consider Larry Page as an example. Although he owns about 3% of Google, his dual-class stock gives him control over nearly 30% of the company’s voting rights. Under the proposed tax, he would be taxed on that 30%—a significant sum given Google’s massive valuation. According to the Post, even startup founders could face overwhelming tax bills; one SpaceX alum working on grid technology could see his entire stake wiped out by taxes as early as the Series B funding round.

David Gamage, a law professor at the University of Missouri and one of the architects of the proposal, believes the tech community’s concerns are exaggerated. In an interview, he suggested that billionaires should simply consult experienced tax attorneys. Gamage maintains that founders wouldn’t be forced to sell their shares; instead, those with most of their wealth in private stock could defer taxes until they eventually sell. “If your startup doesn’t succeed, you owe nothing,” he explained. “But if your company becomes the next Google, California gets a share of your success.” He also noted that founders could provide independent appraisals to determine the actual market value of their shares, rather than relying on the default voting-control calculation.

However, this offers little reassurance. As tax specialist Jared Walczak told the Post, valuing private companies is “inherently difficult.” He pointed out that honest differences in valuation can arise, and if the state disagrees with your assessment, both the company and the appraiser could face penalties. Even with alternative valuations, founders could still be taxed heavily on control they hold but wealth they haven’t yet realized.

For those unfamiliar with the latest developments: California’s largest health care union is advocating for a ballot measure that would impose a one-time 5% tax on individuals with net worths exceeding $1 billion. The union argues that the tax is needed to compensate for major health care funding cuts signed into law by President Trump last year, including reductions to Medicaid and ACA subsidies. The initiative aims to raise approximately $100 billion from about 200 wealthy residents, and it would apply retroactively to anyone living in California as of January 1, 2026.

Backlash and Political Maneuvering

Opposition to the tax is both strong and bipartisan. As the Wall Street Journal reported, Silicon Valley leaders have organized a Signal chat group called “Save California,” which includes figures ranging from David Sacks, a prominent crypto advocate, to Chris Larsen, a major donor to Kamala Harris. Critics have labeled the proposal as “Communism” and “vague.” Some are already taking action: Larry Page reportedly spent $173.4 million on two Miami homes recently, and Peter Thiel’s company leased office space in Miami last month. (Thiel has long had connections to Miami, but a recent press release about the move was seen as a deliberate statement.)

Even Governor Gavin Newsom is actively opposing the measure. In a recent interview with the New York Times, he declared, “This will be defeated, there’s no question in my mind,” and emphasized that he’s been “working tirelessly behind the scenes” to stop it. “I’ll do whatever it takes to protect the state,” he added.

The Road Ahead

Despite the mounting opposition, the union behind the proposal remains steadfast. “Our goal is simply to keep emergency rooms open and save lives,” said executive committee member Debru Carthan in a statement to the Journal. “Those who have left have only demonstrated their extreme greed.”

To qualify for the November ballot, the initiative needs 875,000 signatures and would require a simple majority to pass.