Tech Billionaires Warn of California Exodus as 5% Wealth Tax Sparks Panic

California has long been the glittering promised land for dreamers and disruptors, but that golden sheen might be fading fast for Silicon Valley's elite. A storm is brewing over the West Coast, and this time, it is not about earthquakes or wildfires; it is about money—billions of it.

The state's wealthiest residents are threatening to pack their bags, spooked by a controversial new proposal that could force them to hand over a significant slice of their fortunes. Tech founders warn this isn't just about taxes; it is a move that could fundamentally reshape where innovation calls home.

Tech Billionaires Panic Over Proposed 5% Wealth Tax on Assets

The uproar centres on a bold proposal backed by the Service Employees International Union–United Healthcare Workers West. If passed, it would impose a one-time 5% tax on the assets of California residents worth more than £820 million ($1 billion).

While the measure is still under consideration for the November statewide ballot, the mere possibility has sent shockwaves through the tech community. Supporters argue the revenue is crucial to offset federal funding cuts for healthcare, but opponents see it as a direct attack on success.

Prominent figures are already sounding the alarm. According to a New York Times report, billionaire investor Peter Thiel and Google co-founder Larry Page are weighing whether to cut ties with 'The Golden State' entirely. If the measure qualifies and is approved by voters, it would apply retroactively to anyone living in California as of 1 January 2026.

Why Tech Billionaires Claim the Tax Will Force Them to Sell Companies

The practical implications of the tax are staggering. A resident with £16.4 billion ($20 billion) in assets on the cutoff date would owe a one-time tax of £820 million ($1 billion), payable over five years.

Palmer Luckey, co-founder of defense tech startup Anduril, has been particularly vocal. He warns that the tax would force 'founders like me to sell huge chunks of our companies' to pay for what he described as 'fraud, waste and political favors for the organizations pushing this ballot initiative.'

'I made my money from my first company, paid hundreds of millions of dollars in taxes on it, used the remainder to start a second company that employs six thousand people and now me and my cofounders have to somehow come up with billions of dollars in cash,' Luckey wrote on X.

If he and his peers cannot produce the liquid cash, the state could theoretically seize assets or garnish wages. 'One market correction, nationalisation event, or prohibition of divestiture (not at all uncommon during wartime), and I am screwed for life,' Luckey added.

Tech Billionaires Warn of a 'Double Tax Event' for Startups

The fear goes beyond just the top-tier billionaires. There is deep concern about how the tax might treat paper profits—gains on stocks in companies that haven't even gone public yet. This is a critical form of compensation in the startup world.

The proposal hasn't even officially made it to the ballot box yet, but the mere threat of it has Silicon Valley on edge. To the unions pushing the plan, this is a desperate attempt to plug the holes left by federal healthcare cuts. But to the founders staring down that potential bill, it feels like they are being penalised simply for winning.

'Silicon Valley startups (ironically) follow the herd,' Field posted on X. 'Once enough respected companies/founders establish a pattern, other startups will follow, even if the wealth tax does not apply to them yet.'

Investors Say Tech Billionaires Will Flee a State on a 'Path to Self-Destruction'

The rhetoric from the investment community has been equally sharp. Billionaire investor Bill Ackman called California 'on a path to self-destruction' if the measure moves forward.

'Hollywood is already toast, and now the most productive entrepreneurs will leave, taking their tax revenues and job creation elsewhere,' the Pershing Square chief wrote on X.

Similarly, Dave Friedberg, CEO of Ohalo Genetics, described the proposal as an 'organised government seizure of private property.' He argued that the tax flirts with socialism and represents 'a slippery slope that has never gone anywhere good,' citing economic struggles in countries like Venezuela and France.

Garry Tan, CEO of Y Combinator, told the New York Post web that the measure would cause a 'stampede of unicorns' out of California, draining the state of the technology and jobs it currently enjoys.

Governor Newsom Calls for Calm as Tech Billionaires Clash with Lawmakers

Despite the panic, California Governor Gavin Newsom has tried to temper the situation. Earlier this month, he voiced his opposition to the billionaire tax while cautioning against hysteria.

'It's not something to be panicked about, but it's part of the broader concern and narrative that's developed in this country of the haves and have-nots,' Newsom told an audience at The New York Times DealBook conference.

However, the political divide remains stark. Democratic Rep. Ro Khanna, who represents part of Silicon Valley, flagged the story of Thiel and Page's potential departure with a sarcastic comment echoing President Franklin Roosevelt: 'I will miss them very much.'

Khanna defended the tax concept, arguing that tax dollars helped build the AI industry in the first place. 'We cannot have a nation with extreme concentration of wealth in a few places but where 70 per cent of Americans believe the American dream is dead,' he stated.

Yet, as the November 2026 ballot approaches, the question remains: will California call the bluff of its wealthiest residents, or will the Golden State lose its shine for the innovators who built it?