If you have been following the billionaire exodus from California with confusion, here is what is actually driving the nervousness. The concern is not simply about a proposed one-time 5% tax on fortunes over $1 billion. Instead, the core issue lies in how the tax would be calculated. As highlighted in recent reports, the proposed wealth tax would target founders based on the voting shares they control, not merely the equity they own.
Consider Larry Page, who owns about 3% of Google but controls roughly 30% of its voting power through a dual-class stock structure. Under this proposal, he would owe taxes based on that 30% control. For a company valued in the hundreds of billions, that liability represents far more than a rounding error. One report notes that a SpaceX alumni founder, now building grid technology, would face a tax bill at his company’s Series B stage large enough to wipe out his entire holdings.
David Gamage, the University of Missouri law professor who helped craft the proposal, believes Silicon Valley is overreacting. He insists founders would not be forced to sell. Those with wealth tied up in private stock could use a deferral account, allowing California to collect 5% whenever those shares are eventually sold. “If your startup fails, you pay nothing,” he explained. “But if your startup is the next Google, you’re giving California a share of your gamble.” He also said founders could submit alternative valuations from certified appraisers, reflecting what shares could actually sell for, rather than being assessed solely on the voting-control formula.
However, that offers little consolation to many. For privately held startups, calculating valuations is inherently difficult. A tax expert noted that these assessments are not clear-cut, and different honest appraisers could reach very different conclusions. If the state disagrees with a submitted appraisal, it can penalize not just the company but also the person who calculated the valuation. Even with alternative appraisals, founders could still face enormous tax bills on control they hold for which they have not realized actual wealth.
For context, a California health care union is pushing this ballot initiative. They argue the tax is necessary to offset deep federal cuts to health care programs, including Medicaid and ACA subsidies, signed into law last year. As originally envisioned, the tax would apply retroactively to anyone living in California as of January 1, 2026, and is expected to raise about $100 billion from roughly 200 individuals.
The resistance to the proposal is fierce and bipartisan. Silicon Valley elites have formed a coalition that includes figures from across the political spectrum, from a former Trump administration official to a major donor to Vice President Harris. They have labeled the proposal “Communism” and “poorly defined.” Some are taking precautionary measures, with Larry Page reportedly purchasing two Miami waterfront properties for $173.4 million and Peter Thiel’s firm leasing Miami office space in a move accompanied by an uncharacteristic press release.
Even Governor Gavin Newsom is fighting the proposal. He stated confidently that it will be defeated and mentioned he has been working relentlessly behind the scenes against it, saying, “I’ll do what I have to do to protect the state.”
For now, the union behind the measure is not backing down. An executive committee member stated, “We’re simply trying to keep emergency rooms open and save patient lives. The few who left have shown the world just how outrageously greedy they truly are.”
The proposal needs 875,000 signatures to make it onto November’s ballot, where it would require a simple majority to pass into law.