California’s proposed 5% wealth tax on billionaires has ignited a fierce debate, prompting tech titans to threaten an exodus from the state. Governor Gavin Newsom is maneuvering to defeat the levy, fearing a significant loss of wealth and tax revenue from the state’s financial backbone.
This contentious proposal, aiming to impose a one-time 5% tax on the assets of billionaires, including stocks, art, businesses, and intellectual property, seeks to backfill federal funding cuts to health services for lower-income people. The initiative, championed by a large health care union, highlights the vast economic disparity within the state.
As a technology mecca, California boasts more billionaires than any other state, and nearly half of its personal income tax revenue, crucial for its nearly $350 billion budget, stems from the top 1% of earners. The potential impact of such a tax on this vital revenue stream and the state’s competitive edge is a central concern.
The proposal and tech’s strong reaction
The proposed tax, which would apply retroactively to billionaires residing in California as of January 1, targets a minuscule fraction of the state’s 39 million residents but an immense pool of wealth. According to a review by The Associated Press, at least 25 billionaires from Forbes’ 2025 rankings of the world’s 500 wealthiest people have significant ties to California, as reported by Fast Company.
Tech leaders have voiced strong opposition, warning of severe economic repercussions. Aaron Levie, CEO of Box, stated, “You are really playing with fire with this one,” expressing fears that the tax would deter entrepreneurs from launching and growing companies in the state. Even liberal-leaning tech pioneers, he noted, might find the proposal economically absurd, regardless of their agreement with its social goals.
The online war of words has escalated into significant financial contributions to political committees engaged in the fight. Billionaire Peter Thiel, a co-founder of PayPal, notably contributed $3 million to a business group opposing the tax. This demonstrates the high stakes involved and the deep concerns within the tech community about a potential hollowing out of Silicon Valley.
Political divisions and economic anxieties
Governor Newsom has consistently opposed state-level wealth taxes, believing they would place California at a competitive disadvantage globally. With the state currently facing budget constraints and Newsom potentially eyeing a 2028 presidential run, he is actively trying to prevent the proposal from reaching the ballot, where it requires over 870,000 petition signatures to qualify.
The proposal has created a significant rift within the Democratic party. Vermont Senator Bernie Sanders has endorsed the tax, advocating for it as a template for other states, arguing that “our nation will not thrive when so few have so much while so many have so little.” Democratic Representative Ro Khanna, another potential rival to Newsom, openly mocked billionaires for threatening to flee over a tax designed to fund healthcare for lower-income individuals.
Conversely, the Service Employees International Union (SEIU), the measure’s lead proponent, dismisses the threat of an exodus as exaggerated. Suzanne Jimenez, chief of staff of SEIU-United Healthcare Workers West, described the tax as a “workable response to a crisis created by Congress,” emphasizing its role in maintaining essential health services. Meanwhile, the California Business Roundtable is actively campaigning against the measure, asserting it would “undermine our economy, decimate the state budget, drive investment out of the state and ultimately make everyday life more expensive for working families.”
The debate over the California billionaire tax underscores a broader tension between wealth generation and social equity. With the proposal’s fate still uncertain, the outcome will undoubtedly shape the state’s economic future and its standing as a global hub for innovation.
