Some of the most recognizable names in venture capital and Big Tech are pouring millions into a political fight to defeat the proposed California wealth tax. If passed in November, Proposition 40 would levy a one-time 5% tax on billionaires' wealth. This legislative battle is critical for startup founders, venture capitalists, and tech investors, as the outcome could either reshape how illiquid tech wealth is taxed or trigger a mass exodus of talent from the state.
Campaign finance records reveal that Palantir cofounder Peter Thiel, crypto billionaire Chris Larsen, Google cofounder Sergey Brin, and veteran venture capitalist John Doerr are actively funding political action committees (PACs) opposing the measure. Thiel, who officially cut ties with California in 2025 ahead of the proposed tax, has donated $3 million to the California Business Roundtable Issues PAC. That same PAC subsequently funneled $450,000 to Golden State Promise, a committee directly opposing Proposition 40.
The crypto industry is also heavily involved. Larsen contributed $5 million to Golden State Promise, while Ripple Labs, the company he cofounded, injected another $5 million. Meanwhile, a separate anti-Proposition 40 committee representing small businesses, doctors, and teachers received $5 million from Building a Better California, a group whose top financial backers include Brin and Doerr. Brin has also recently reduced his official and financial ties to the state.
The financial stakes for these donors are massive. Experts project that Proposition 40 would raise $100 billion for California over five years, with 90% of the funds earmarked for health care and the remainder allocated to education and food assistance. According to an analysis from Wealth Management, a founder with a net worth of $1.1 billion would face a $55 million tax liability. Defeating the ballot measure would allow these billionaires to avoid that exact liability entirely.
The multimillion-dollar pushback has ignited a fierce debate over whether taxing paper wealth will raise necessary public funds or simply drive innovation out of the state. Over the weekend, billionaire entrepreneur Mark Cuban publicly sparred with Rep. Ro Khanna (D-Calif.), a prominent defender of the tax, arguing that the proposition fundamentally misunderstands that founders can be billionaires on paper while remaining cash-poor.
If this passes, only idiot startup founders stay in Cali.
- Mark Cuban, Entrepreneur and Investor
Khanna pushed back on the social platform X, arguing that truly illiquid "paper billionaires" represent only a fraction of the targeted population. He suggested a workaround where founders could hand over their startup shares to the state in exchange for a loan to cover the tax, ensuring the government would "still collect from the vast majority of billionaires who are not illiquid."
Emmanuel Saez, director of UC Berkeley’s Stone Center on Wealth and Income Inequality and co-author of an expert report on Proposition 40, noted that the tax targets roughly 250 Californians who built their fortunes in the state. Saez explained that founders lacking immediate cash can utilize a deferral option, paying 5% of whatever proceeds they eventually take out of their business through dividends or stock sales. "If the business fails, they won’t have to pay anything," Saez stated. "If the business succeeds, they’ll have to pay 5% of that success eventually."
Why the California Wealth Tax Could Trigger a National Tech Exodus
The battle over Proposition 40 is no longer just a state-level issue; it is a testing ground for a broader national agenda. Rep. Khanna and Sen. Bernie Sanders (I-Vt.) have already introduced federal legislation proposing an annual 5% wealth tax on Americans worth over $1 billion, aiming to fund $3,000 payments to lower- and middle-income households. If California successfully implements this tax, it will serve as the definitive proof-of-concept for Washington.
For the tech industry, the immediate risk extends far beyond billionaires paying their fair share - it threatens the structural mechanics of early-stage venture capital. If founders are forced to liquidate equity or hand over shares to the state to cover tax liabilities, startup cap tables will become highly complex and potentially unappealing to seed investors. This friction could accelerate the ongoing migration of tech hubs away from Silicon Valley toward zero-income-tax states like Texas and Florida, fundamentally decentralizing the American innovation economy.
