For those who have been watching the exodus of billionaires from California with some confusion, here’s what’s really causing concern: It’s not the 5% rate. As the New York Post highlighted on Friday, the proposed wealth tax would be taxed on shares that founders have voting rights in, rather than on shares they actually own.
Let’s take Larry Page as an example. He owns about 3% of Google, but controls about 30% of the voting power through dual-class stock. Under the proposal, he would be liable to pay taxes on 30% of that. For a company worth hundreds of billions of dollars, this is far more than a rounding error. The Post reported that one of the alumni founders of SpaceX, which is building grid technology, will face a tax bill that wipes out his entire stake in the company’s Series B stage.
David Gammage, a University of Missouri law professor who helped write the proposal, believes Silicon Valley is overreacting. “I don’t understand why billionaires don’t get good tax lawyers,” he told the San Francisco Standard this week. Gamage insists the founders will not be forced to sell. People who hold most of their assets in private equity can open deferral accounts for assets they don’t want to be taxed right away. In exchange, California would collect 5% each time those shares are ultimately sold. “If a startup fails, it doesn’t cost you any money,” he explained. “But if your startup is the next Google, you’re giving California a piece of the bet.” He also said founders could submit an alternative valuation from a certified appraiser that reflects what the stock would actually sell for, rather than sticking to the default voting rights management method.
But that’s a pretty small consolation. For startups that aren’t publicly traded, calculating valuations is “inherently difficult,” tax expert Jared Walczak told the Post. “These are not clear-cut. You could come to a completely different conclusion, not because of fraud.” And if the state disagrees with your assessment, the problem isn’t just with the companies. The government can also impose penalties on the person who calculates the assessed value. Even with alternative valuations, founders would still face huge tax bills on unrealized wealth despite the control they possess.
Now, if you’re facing hardship, California’s health care union is pushing a ballot initiative that would impose a one-time 5% tax on people with assets of $1 billion or more. The union argues it is necessary to offset deep cuts to health care that President Trump signed into law last year, including cuts to Medicaid and ACA subsidies. As originally envisioned, the tax is expected to raise about $100 billion from about 200 individuals and would be retroactive to California residents as of January 1, 2026.
But the resistance is fierce and bipartisan. As the WSJ reported over the weekend, Silicon Valley elites have formed a signal chat called “Save California,” which includes everyone from President Trump’s crypto czar David Sachs to Kamala Harris’ megadonor Chris Larsen. They call the proposal “communist” and “poorly defined.” Larry Page reportedly spent $173.4 million on two Miami waterfront properties between last month and the first week of the new year, and Peter Thiel’s company leased office space in Miami last month, and some are taking precautions. (While Thiel has long had ties to Miami, including his home, the unusual press release about the move appears to have been intended to send a message.)
Even Gov. Gavin Newsom is fighting it. “This is going to fail. There’s no question in my mind,” he told The New York Times this week, adding that he has “worked relentlessly behind the scenes” against the proposal. “I will do what I have to do to protect the country.”
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So far, the union has not backed down. “We’re just trying to keep emergency rooms open and save patients’ lives,” executive committee member Devereux Carsan told Barron’s over the weekend. “The few people left showed the world how outrageously greedy they really were.”
The proposal needs 875,000 signatures to be on the November ballot, and a simple majority is required for passage.
