California’s proposed billionaire tax divides tech industry

A plan to tax California’s billionaires has tech leaders picking sides: some say they’ll pay up, others are packing their bags for different states.

Here’s what’s on the table: any California resident worth more than $1 billion would pay a one-time tax of 5 percent on their assets. The money would go to schools, food assistance programs, and healthcare across the state.

Tech elite are divided on the proposal

Nvidia CEO Jensen Huang, worth nearly $159 billion, told Bloomberg Television this week he’s fine with it.

“We chose to live in Silicon Valley,” Huang said. “And whatever taxes, I guess they would like to apply, so be it.”

But he’s pretty much alone among tech’s elite. Google co-founder Larry Page, Palantir co-founder Peter Thiel, and David Sacks, Donald Trump’s new AI and crypto czar, have all recently said they’re leaving California for states with friendlier tax policies like Florida and Texas.

The Service Employees International Union-United Healthcare Workers West is pushing the tax proposal. If it passes, it kicks in retroactively for anyone who was a California resident as of January 1 this year. Billionaires would get five years to pay.

That means Huang would owe around $7 billion. Page’s bill would come to about $13 billion, and Thiel would pay roughly $1.3 billion based on what they’re worth now.

Suzanne Jimenez, chief of staff for SEIU-UHW, says the current system isn’t fair. “Regular working people pay higher effective tax rates than the wealthiest Americans,” she wrote in an email. “Asking those who have benefited most from the economy to contribute more – particularly to stabilize health care systems under direct threat – is a reasonable step.”

The proposal still has a ways to go. Under California law, supporters need to collect 874,641 signatures to get it on the November ballot. Then Governor Gavin Newsom would have to sign it, and he’s already said he’s against a wealth tax.

“You can’t isolate yourself from the 49 others,” Newsom said at last month’s New York Times DealBook Summit. “We’re in a competitive environment.”

That puts him at odds with Ro Khanna, the California congressman who represents Silicon Valley. Khanna’s been a big supporter of taxing the ultra-wealthy. He thinks tech billionaires will stay put despite the tax because California is where the industry, innovation, and talent are. “A billionaire tax is good for American innovation,” Khanna said, arguing it spreads wealth to other sectors.

When Thiel announced he was leaving over the proposed tax, Khanna posted on X: “I echo what FDR said with sarcasm of economic royalists when they threatened to leave, ‘I will miss them very much.’”

Not the first time billionaires have left

This isn’t California’s first rodeo with billionaire departures. Elon Musk, the world’s richest person, left for Texas in 2020, saving himself millions in taxes. He’s moved several company headquarters there too. Last year, he said he was relocating SpaceX to Texas because of a California law protecting transgender kids in schools. He called it a “final straw.”

Texas has become a popular destination for tech billionaires because it doesn’t have a state income tax. Palantir co-founder Joe Lonsdale moved to Austin in 2020 for better tax treatment. Larry Ellison moved Oracle’s headquarters there the same year (though he’s now moving the company to Nashville). Michael Dell, who founded Dell Technologies, has lived in Texas for years.

Sacks announced his move on December 31, posting a Texas flag on X and writing: “God bless Texas.” The next day, he added: “As a response to socialism, Miami will replace NYC as the finance capital and Austin will replace SF as the tech capital.”

Musk, Lonsdale, and Dell all welcomed him warmly. “No one will fight harder for the independent and free spirit of Texas than people who know [sic] it’s like when that’s taken away,” Musk wrote.

Page hasn’t said publicly where he’s going, but companies linked to him filed incorporation papers in Florida last month, according to the New York Times. Thiel, who owns a house in the Hollywood Hills, looks to be headed to Florida too. His investment firm, Thiel Capital, announced on December 31 that it had opened a Miami office. The firm said Thiel has kept a home there since 2020.

On X, tech investors and billionaires have blasted the wealth tax idea. Chamath Palihapitiya, a venture capitalist and former Facebook exec, said without billionaires, California’s “budget deficit will only get bigger.” Vinod Khosla, another investor, warned that “California will lose its most important taxpayers and net off much worse.”

Some are talking about going after Khanna’s congressional seat. Martin Casado, a partner at Andreessen Horowitz, wrote that Khanna had “devolved into an obnoxious jerk” and that his support for the wealth tax had turned off moderate voters. Garry Tan, CEO of startup accelerator Y Combinator, responded: “Time to primary him.”

Jimenez from SEIU pointed to Massachusetts and Washington, which have other types of wealth taxes. She said those states have raised billions while high-income residents kept seeing their portfolios grow. The union is “heartened” by Huang’s comments and hopes more billionaires will follow his lead.

As for Huang, he said Nvidia is in Silicon Valley because that’s where the engineers are, and he’s not worried about a billionaire tax.

“Not this person,” Huang said. “This person is trying to build the future of AI.”

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