“The American Dream is Dead.” A proposal to tax their wealth has angered Silicon Valley billionaires

A proposal for a tax on the wealth of billionaires has not yet met all the criteria to be submitted to a referendum in the US state of California, the center of the technology industry in the United States, but it has already sparked strong opposition from the founders of companies in the sector, Fortune magazine reports.

The public outcry erupted after The New York Times reported over the weekend that venture capital investor Peter Thiel and Larry Page, one of Google's two founders, were considering leaving California if the tax became law.

Ro Khanna, a Democratic congressman who represents part of the Silicon Valley constituencies, re-shared the article on the social network “X” and sarcastically recalled a famous line of President Franklin Delano Roosevelt: “I will miss them very much.”

The proposal calls for California residents with more than $1 billion in wealth to pay a one-time tax equal to 5 percent of their assets, which can be paid in installments over five years. Proponents of the wealth tax, which want to use the revenue to offset health care cuts approved by Congress under the Trump administration's proposal, still need to collect enough signatures to put the initiative on the ballot in November 2026.

The USA will then organize the so-called midterm elections for the Congress, and the various constituent states of the USA often take advantage of such elections to organize, in parallel, at the local level, referendums on various proposed measures.

Wave of negative reactions to the billionaire tax proposal

Although Khanna represents California in Congress in Washington, not in the local California legislature that would have to ratify such a measure, his public support for the wealth tax has sparked a wave of backlash.

Palmer Luckey, co-founder of military technology company Anduril, warned that the tax would force entrepreneurs to sell significant parts of their businesses to pay for “fraud, waste and political favors for the organizations pushing this ballot initiative.”

Lucky complained that if he and other businessmen couldn't raise billions of dollars in cash to pay the tax, California authorities could seize his home and garnish his income. “One market correction, a nationalization event or a ban on the sale of shares (not at all unusual in wartime) and my life is destroyed for good,” Luckey wrote in a personal message he posted on the “X” network.

Dylan Field, one of the founders and CEO of the tech company Figma, warned in turn that entrepreneurs and even the first employees of the companies, who receive a stake in them, could be targeted by the wealth tax, without having the opportunity to use their shares in the company to pay it.

According to him, some founders may also have to pay capital gains taxes, which would mean a “double taxation event”. He explicitly mentioned the possibility of an exodus of tech billionaires from California.

“Silicon Valley startups (ironically) follow the herd. Once enough respected companies or founders set a precedent, other startups will follow, even if the wealth tax doesn't apply to them yet,” Field wrote on “X.”

“The American Dream is Dead”

But Congressman Khanna said he opposes taxing unrealized gains and supports “alternative solutions” for founders with assets that cannot currently be capitalized and unprofitable companies. But he also said the tax money helped build the artificial intelligence industry and dismissed the idea that tech entrepreneurs would be deterred from launching companies in California because of a 1 percent annual tax, adding that innovators are drawn to the region's talent.

“We cannot have a nation where wealth is highly concentrated in a few places while 70 percent of Americans believe the American Dream is dead and that health care, child care, housing and education are unaffordable,” he told X.

“What will stifle American innovation, what will make us fall behind China, is if we see growing political dysfunction and social tension, if we fail to cultivate the talent of every American, in every city and community,” the Democratic lawmaker added.

Dave Friedberg, co-founder and CEO of Ohalo Genetics, rejected his arguments. Instead, the businessman claims that the wealth tax amounts to an “organized government seizure of the private property of citizens” who have already paid other taxes that can reach, in California, a threshold of 53%.

The proposed measure has drawn comparisons to the Soviet Union and Cuba

Friedberg complained that the tax “flirts with socialism” and amounted to “a slippery slope that never led to anything good (see the economic effects of the USSR, Cuba, Venezuela, as well as wealth taxes in France and Norway, etc.)”.

Garry Tan, CEO of startup accelerator Y Combinator, told The New York Post that the wealth tax would drive capital out of California, hurt innovation and ultimately undermine support for health care.

“This measure would cause a mass exodus of California's unicorns to other states, reaping the benefits of entrepreneurs, technology and jobs that California currently enjoys,” he added.

A major concern is how a potential wealth tax would treat capital gains from stock appreciation and stakes in unlisted companies – a key form of remuneration among startups that have yet to become profitable.