It began with Elon Musk and Larry Ellison, and now the founders of Google, along with venture capital titans like Peter Thiel, have joined the exodus. Decades ago, they arrived in Silicon Valley from all corners of the globe, realizing their entrepreneurial dreams and becoming billionaires. Today, however, a shift in California's political climate and the specter of a super-wealthy tax are driving them to flee.
The debate over a proposed one-time 5% tax on the super-rich in California raises a fundamental question: is it a move towards social equality and narrowing the wealth gap, or is it a case of killing the goose that lays the golden eggs and stifling innovation? Regardless of the final outcome, the super-wealthy have already begun their preemptive departure.
Is the budget deficit being solved by targeting the super-rich? California is the wealthiest and most populous state in the US. By GDP, it ranks as the world's fourth-largest economy, trailing only the United States, China, and Japan. Silicon Valley, in particular, is a global hub of technological innovation, having spawned generations of tech giants like Apple, Alphabet, and Meta, which have transformed how people worldwide work and live, creating waves of billionaires.
Yet, this land of wealth creation is mired in an unprecedented fiscal crisis. According to the latest projections from California's Legislative Analyst's Office, the state faces a nearly $18 billion budget deficit for the 2026-27 fiscal year, marking the fourth consecutive year of fiscal shortfalls. More alarmingly, the structural deficit could balloon to $35 billion by the 2027-28 fiscal year.
Why is the wealthiest state facing a fiscal crisis? This is not merely a cyclical fluctuation. Although the stock market boom fueled by the AI frenzy has brought robust tax revenue growth to California, rapidly expanding public expenditures, particularly for the Medi-Cal program, are consuming revenues at an even faster rate. For three consecutive years, California has relied on emergency funds, internal borrowing, and accounting maneuvers to plug deficits totaling tens of billions of dollars, and its available fiscal tools are nearing exhaustion.
With California's public finances in severe straits and the state hosting so many billionaires, a radical proposal quickly gained traction: why not impose an additional tax on billionaires to solve the budget deficit?
This idea soon materialized into a specific plan: the "2026 Billionaire Tax Act," championed by the Service Employees International Union-United Healthcare Workers West (SEIU-UHW), which aims to levy a one-time 5% wealth tax on approximately 200-250 Californian billionaires with fortunes exceeding $1 billion.
The proposal is meticulously designed. The tax benchmark date is set for January 1, 2026. This means any billionaire residing in California on that day becomes a potential taxpayer.
The logic of the proposal's supporters is clear: the collective wealth of California's billionaires skyrocketed from $300 billion in 2011 to $700 billion in 2019, and surpassed $2.2 trillion by 2025. Over the past four decades, billionaire wealth has grown at an average annual rate of about 7.5%, far exceeding the 1.5% growth rate of ordinary income.
More critically, relative to their true economic income, billionaires pay an effective tax rate of just 24%, below the national average of 30%. And relative to their total wealth, their annual tax burden is a mere 1.3%, significantly lower than the 3.1% rate during the Reagan era.
This super-wealth tax would apply to assets including stocks, bonds, artwork, intellectual property, and shares in private companies, while deliberately excluding real estate and retirement accounts.
The union is currently collecting signatures; if it gathers approximately 875,000 signatures, the measure will be put to a popular vote during this November's midterm elections. If approved, this special tax is projected to raise about $100 billion over five years, with 90% allocated to healthcare services and 10% to education and food assistance.
Economist Emmanuel Saez from UC Berkeley noted in a report, "California is the ideal place to implement a billionaire tax because the state has 12% of the US population but hosts 28% of the nation's billionaire wealth. A one-time 5% levy is relatively modest compared to the rate at which billionaire wealth has been growing."
Clear divisions within the Democratic Party However, this seemingly reasonable proposal has sparked rare disagreement among California Democrats. Both supporters and opponents have compelling arguments.
California Governor Gavin Newsom has explicitly opposed the proposal. This political star, seen as a potential Democratic presidential candidate for 2028, has taken an unusually conservative stance on the wealth tax. He has repeatedly stated that a wealth tax "doesn't work for California," warning it could drive away the innovation economy and ultimately harm middle-class jobs and long-term tax revenue.
This is not the first time Newsom has opposed a wealth tax. Last year, when Democratic legislators proposed a similar measure, he publicly opposed it and distanced himself from the initiative. As Newsom is almost certain to run for president in 2028, he is deliberately creating space between himself and California's progressive left.
Nevertheless, Newsom's opposition is grounded in practical concerns: the historical track record of wealth taxes in other jurisdictions is not encouraging, with most attempts ending in failure, often resulting in capital flight and an overall decline in tax revenue.
Matt Mahan, mayor of San Jose, Silicon Valley's largest city, also expressed opposition: "I support taxing billionaires, but (the super-wealth tax) is not the right way. It will cause billionaires and their companies to leave California, ultimately placing a heavier burden on middle-class families."
Indeed, the super-wealth tax is not a new concept, but its implementation has been fraught with controversy. In the early 1990s, 12 European countries had significant wealth taxes, but by 2017, only Switzerland, Norway, and Spain remained. France, Sweden, Denmark, and others repealed their high wealth taxes for similar reasons: an exodus of the wealthy, tax revenues falling short of expectations, high administrative costs, and valuation difficulties.
Former French President François Hollande introduced a 75% super-tax on high incomes in 2012, but it was abolished after just two years because numerous high-earners and business elites left France to avoid it. France not only failed to increase tax revenue but also lost substantial talent and investment.
After Sweden implemented a wealth tax in the 1970s, it experienced severe capital flight. IKEA founder Ingvar Kamprad left Sweden for Switzerland during that period. Sweden abolished its wealth tax in 2007, explicitly stating that the economic distortions it caused far outweighed the fiscal benefits.
However, supporters of the California super-wealth tax include many heavyweight figures within the Democratic Party. While federal Senator Bernie Sanders' support for "soaking the rich" is unsurprising, Representative Ro Khanna, who represents the San Jose area, has also announced his backing.
Khanna wrote on social media, "These super-rich collectively own $2 trillion in wealth—an almost unimaginable number. Due to state and federal tax loopholes, much of their wealth is invested in the stock market and other assets and may never be taxed in their lifetimes."
The super-rich are fleeing in advance While the political debate over whether to tax continues, the super-rich are already taking preemptive action.
The moves by Alphabet co-founder Larry Page are the most conspicuous. According to public filings from the California Secretary of State's office, Page relocated more than 10 business entities associated with him out of California before the end of December 2025. His family office, Koop LLC, and his flu research fund, Flu Lab LLC, are no longer registered in California, and his flying car company, One Aero, has changed its primary address to Florida.
Even bigger moves followed. In less than a month, Page purchased two mansions for $173.5 million in Miami's most exclusive enclave, joining the ranks of Jeff Bezos and others. The world's second-richest person, with a fortune of approximately $258 billion, is rapidly severing his ties to California.
According to media reports, Alphabet's other co-founder, Sergey Brin, is also discussing (and likely has already) purchasing a property in Miami. Their departures were entirely predictable; if the super-wealthy tax were imposed on them, the two would face a combined tax bill exceeding $26 billion.
The departure of the two Alphabet founders is more symbolic than practical—after all, the company's Mountain View headquarters and thousands of employees remain in California. Although relocating the entire company away from Silicon Valley is currently implausible, their actions send a clear signal to the entire tech ecosystem: even the most successful tech entrepreneurs are reassessing their relationship with California.
Venture capitalist Peter Thiel took action much earlier. On December 31, 2025, he announced that he had been primarily residing in Miami since 2020, and his Founders Fund venture firm had established a Miami office back in 2021. This move was clearly a public declaration that he is no longer a primary resident of California, conveniently timed just before the January 1 tax benchmark date.
David Sacks, a special assistant to the president for technology policy and a fellow member of the PayPal founding team along with Thiel and Musk, also announced at the end of last year that he had moved his investment fund to Austin, Texas.
Meanwhile, other super-rich who had already left California are divesting their remaining properties in Silicon Valley to avoid appearing on the state's tax radar. Oracle founder Larry Ellison, who moved away from California during the pandemic, owns over 95% of the land on Lanai, Hawaii's sixth-largest island, and also possesses a mansion in a wealthy Florida enclave.
It is noteworthy that Ellison sold his San Francisco mansion, where he had lived for over 30 years, for $45 million at the end of last year—the largest real estate transaction in the area that year. Clearly, Ellison is also promptly cutting ties with California. If taxed, Ellison, with a fortune of $192 billion, would face a bill of approximately $9.6 billion.
Musk saves a fortune in taxes In reality, the super-rich began fleeing California en masse years ago. Elon Musk's very public "declaration of war" with the California government provides a perfect case study.
In 2020, Musk moved his primary residence from California to Texas and sold all seven of his California mansions, completely severing his personal ties to the state. On the surface, his reasons were dissatisfaction with California's strict COVID-19 measures and perceived overregulation in environmental protection and labor rights. However, it's equally undeniable that Musk was proactively avoiding a massive future tax bill on stock sales.
California's top income tax and capital gains tax rates are both 13.3%, while Texas has no state income tax or capital gains tax. This means that when Musk sells shares, he saves roughly a quarter of the proceeds that would have gone to taxes in California.
The financial impact of this decision is staggering. Over the past few years, to pay taxes on exercised stock options and to fund the acquisition of Twitter, Musk has sold nearly $40 billion worth of Tesla stock.
It's also worth noting that last year, Tesla's board granted him a performance-based compensation plan worth up to $1 trillion (the specific share allocation depends on achieving performance targets). Musk's move to Texas will save him an unimaginable amount in potential future taxes.
In the subsequent years, Musk relocated the headquarters and legal domiciles of Tesla, SpaceX, xAI (which acquired X), and The Boring Company to Texas. This is not merely a personal decision but a significant strategic shift for his corporate empire. Texas offers not only a relaxed regulatory environment but also substantial business incentives for Musk's companies.
In 2020, to attract Tesla's Gigafactory to Austin, local governments offered Tesla $14 million in tax rebates over ten years, plus an 80% property tax abatement worth approximately $50 million over 15 years.
Ironically, Musk's business empire has been built on substantial government support. According to an analysis by The Washington Post, over the past two decades, Musk and his companies have received at least $38 billion in government contracts, loans, subsidies, and tax credits.
Similarly, Ellison, after moving to Hawaii, enjoys lower income taxes. Hawaii's top income tax rate is 11%, and the capital gains tax tops out at 7.25%. For tech super-rich whose wealth is primarily in stock holdings, this equates to saving nearly half the tax on stock sales compared to California.
Significant hurdles to implementation lie ahead A fundamental challenge facing the super-wealthy tax is: how do you tax wealth that exists primarily in the form of stock?
This is because most billionaires' fortunes are not held in cash or liquid assets but are tied up in shares of the companies they founded or invested in. The wealth of Page and Brin is largely in Alphabet stock, Musk's net worth is mostly in equity from Tesla, SpaceX, and xAI, and Jensen Huang's fortune is dependent on the NVIDIA share price.
Palmer Luckey, co-founder of defense tech startup Anduril (and also founder of Oculus), complained on platform X: "I made money selling my first company ($2 billion to Zuckerberg) and paid hundreds of millions in taxes on it; I used the remaining money to start a second company that employs 6,000 people. But now (if the super-wealth tax passes), my co-founder and I would have to figure out how to come up with billions of dollars in cash."
This exposes a critical weakness of the super-wealth tax: the super-rich often have limited liquid assets, and being forced to come up with billions in tax dollars could necessitate selling stock. This could depress share prices, harm company valuation, and ultimately hurt not only the wealthy individuals but also ordinary shareholders, employees, and the broader economic ecosystem.
California's proposal does acknowledge this issue, suggesting that billionaires be allowed to pay the tax in installments over five years, albeit with additional interest charges. Nevertheless, it still means billionaires would need to find billions, or even tens of billions, in cash annually—potentially forcing massive stock sales or complex financial maneuvers.
Political opposition to the super-wealth tax is gathering strength. In a December 11 letter to Newsom, prominent California attorney Alex Spiro warned that several of his clients ("California residents who would be affected by the proposed billionaire tax") are preparing to "permanently relocate." Business organizations like the California Chamber of Commerce and the Silicon Valley Tech Council have also voiced clear opposition.
On the other hand, the unions and progressive organizations advocating for the tax possess strong grassroots mobilization capabilities. In the context of a second Trump administration and potential cuts to federal social welfare programs, the appeal of "protecting healthcare" could resonate with voters. If the economy slips into a recession this year, the attractiveness of a wealth tax might increase further.
A legal battle is also brewing. Legal experts widely believe that even if the proposal is approved by California voters, it will face a series of constitutional challenges. Law firms are preparing for potential lawsuits based on arguments including violations of due process, the Dormant Commerce Clause, and constituting a bill of attainder. These legal fights could potentially reach the U.S. Supreme Court and drag on for years.
Shifting political winds in the US Notably, the debate over California's wealth tax reflects deeper shifts in American political sentiment.
Over the past decade, widening wealth inequality has become one of the most prominent social conflicts in the US. Official data shows that billionaire wealth as a percentage of US GDP has risen from 2% in 1982 to 10% in 2025. Over the past forty years, billionaire wealth grew at an annual rate of 7.5%, while ordinary income grew at just 1.5%.
This inequality has fueled a political "leftward turn." Progressive Democrats, represented by Bernie Sanders, who advocate for significantly higher taxes on the wealthy—a fringe view a decade ago—have now entered mainstream political discourse. Younger voters, in particular, facing soaring housing costs, education expenses, and healthcare bills, are increasingly supportive of such policies and express growing dissatisfaction with the "billionaire class."
The California wealth tax proposal emerges directly from this context. The SEIU did not choose this timing by accident—the Trump administration's cuts to federal Medicaid funding provide a perfect rationale for the "tax the rich to fund social programs" narrative. The union proclaims this is the only way to "make the wealthy pay their fair share" and "protect healthcare."
From a moral standpoint, the wealth tax has its rationale. When billionaire wealth grows at 7-8% annually while ordinary wage earners' incomes stagnate, and the wealth gap widens relentlessly, calls for the rich to "pay their fair share" seem justified. Furthermore, due to various tax loopholes, many billionaires pay a lower effective tax rate than the middle class—Warren Buffett famously pointed out that his tax rate was lower than his secretary's.
Especially at a time when California faces funding shortages for essential public services like healthcare and education, the billionaire class, sitting on $2.2 trillion in wealth, appears to be an ideal source of revenue. Proponents ask: why should the middle class bear the pain of cuts to public services, rather than those with fortunes they could never spend in multiple lifetimes contributing a small portion?
However, from a practical perspective, wealth taxes face enormous implementation challenges and potential negative consequences. The wealthy are far more mobile than ordinary people, with access to the best lawyers, accountants, and financial planners to quickly rearrange assets and residency. The failed experiments in multiple European countries demonstrate that wealth taxes often lead to capital flight, fail to meet revenue expectations, and ultimately harm economic vitality.
California's position is particularly delicate. The state's prosperity is largely built on innovation and entrepreneurship, which require risk capital, entrepreneurial spirit, and talent clustering. If the policy signal is "success will be penalized," it could dampen entrepreneurial enthusiasm, reduce investment, and ultimately damage the entire economic ecosystem—including the very working-class people who might support the wealth tax.
This is the paradox of justice: policies born of moral intent can produce unjust outcomes. True fairness might lie not in Robin Hood-style redistribution, but in creating a society where more people can achieve upward mobility through effort.
The outcome of this contest will have profound implications. If California's wealth tax passes and withstands legal challenges, it could provide a template for other states, opening a new chapter in American wealth redistribution. If it triggers a mass exodus of the wealthy and damages California's economy, it will become another case study in policy failure, proving the pitfalls of populism.
Regardless of the outcome, one thing is clear: the status quo is unsustainable. With the wealth gap continuing to widen, the middle class being hollowed out, and younger generations growing increasingly pessimistic about the future, America needs to find a path that preserves innovation and economic vitality while achieving a fairer distribution of wealth. This is not a simple left-right debate, but a fundamental question about redefining capitalism for the 21st century.
Amidst this clamor, perhaps the most composed voice comes from NVIDIA CEO Jensen Huang. The world's ninth-richest person, with a fortune of $155 billion, stated very calmly that he is "totally fine" with the tax. "I have to tell you, I haven't even thought about it once," Huang said. "Since we choose to live in Silicon Valley, whatever taxes they want to levy, we just accept it."
Perhaps the personal fulfillment and wealth growth Huang derives from leading NVIDIA and continuing to pioneer the AI era far outweigh the incentive to flee California to avoid a tax bill of several billion dollars.
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