Threat of California Billionaire Tax Draws Criticism From Ultrawealthy
Opponents say tax proposal is driving high-net-worth residents out of state. It would retroactively apply to billionaires who were residents on Jan. 1.
A proposed California ballot initiative seeks a one-time 5% tax on assets of billionaires, with payment due over five years.
The firms of investors Peter Thiel and David Sacks said on New Year’s Eve that they opened new offices outside of California.
The proposed tax, estimated to raise $100 billion, faces opposition from Gov. Gavin Newsom and potential legal challenges.
High-profile tech investors criticized a proposed tax on the ultrawealthy in California in the final hours of 2025, while some of the state’s big-name billionaires took steps to create distance between themselves and the Golden State.
A proposed ballot initiative from a California healthcare union would impose a one-time, 5% tax on the assets of those with net worths above $1 billion who lived in the state as of Thursday. The tax would apply to assets like stocks, artwork and intellectual property rights, rather than income, and billionaires would have five years to pay.
Bay Area investor Chamath Palihapitiya said on X Thursday that he knew of people “with a collective net worth” of $500 billion who “scrambled and left California for good” before the end of 2025.
“They took no risk because of the proposed asset seizure tax—introduced as a ‘Billionaire Tax,’ ” he wrote. “Without these people, the California budget deficit will only get bigger.” Palihapitiya didn’t name any individuals or provide proof of his claim. He didn’t immediately return a request for comment.
The firms of two high-profile California investors issued announcements on New Year’s Eve about establishing new offices out of state, without saying anything about the proposed Golden State tax.
Tech investor Peter Thiel’s investment firm, Thiel Capital, said it signed a lease in December for office space in Miami. The office will “complement Thiel Capital’s existing operations in Los Angeles,” the company said.
Thiel has “established a significant presence in Miami over the last several years,” the release said. Thiel bought a house in Miami Beach in 2020, which was once the set for “The Real World: Miami,” and opened a Florida office for his Founders Fund venture-capital firm in 2021.
Venture-capital firm Craft Ventures, which Trump administration AI and crypto czar David Sacks co-founded in 2017, said that the company had signed a lease on an office space in Texas in December. The company said co-founder Bill Lee has been living and working in Austin since 2022, and that Sacks had “relocated to the area” earlier in the month.
Both founders will “now be working out of the new Austin office,” but Craft will maintain its offices in New York and San Francisco.
Thiel has a house in the Hollywood Hills in Los Angeles and Sacks has a home in Pacific Heights in San Francisco. Representatives for Thiel and Sacks didn’t return requests for comment.
California, home to a host of Silicon Valley and Hollywood titans, had an estimated 255 billionaires last year, more than any other state, according to Altrata, a wealth-intelligence firm. More than one-third of California’s tax revenue comes from the top 1% of earners.
The wealth tax proposal still needs some 875,000 signatures to appear on the November ballot and, if passed by voters, would retroactively apply to billionaires who were residents on Jan. 1.
Claims of the ultrawealthy fleeing to avoid taxation “are often overstated, and decades of research show that tax-driven migration among the very wealthy is limited,” said Suzanne Jimenez, the ballot measure sponsor and the chief of staff of the Service Employees International Union-United Healthcare Workers West.
The billionaire tax proposal, which would raise an estimated $100 billion, is “simple, one time, fair, and workable now” to address one issue, she said: looming federal cuts to Medicaid.
“Asking those who have benefited most from the economy to contribute more—particularly to stabilize healthcare systems under direct threat—is not radical. It is reasonable,” she said
Proving to California’s tax board that you are no longer a resident and not required to pay its state taxes is a complex process that requires extensive documentation and can drag on for years, experts say.
The union’s proposal has sparked some high-profile opposition, including from California Gov. Gavin Newsom, a Democrat. Consultants allied with Newsom are running the campaign to oppose the measure. Venture capitalist Ron Conway has contributed $100,000 to the committee, which is called “Stop the Squeeze,” campaign finance records show.
Newsom has fielded entreaties from billionaires and their allies, including from a litigator who has represented clients including Elon Musk and Jay-Z. The lawyer, Alex Spiro of Quinn Emanuel, told Newsom in a December letter seen by The Wall Street Journal that his billionaire clients in California were prepared to start years of “protracted and expensive” litigation if the measure moved forward. He didn’t name those clients.
Spiro said in the letter that the passage of the wealth tax could create an exodus of billionaires from the state and trigger market instability if they were forced to liquidate or reduce stakes in businesses, venture capital funds and real estate to pay the tax bill. His clients “prefer to remain in California and continue contributing to the state’s economy and civic life,” Spiro wrote, but won’t stay in the state if they are “subjected to an unconstitutional confiscation of their wealth.”
The California proposal has sparked a broader public debate among some billionaires over alternate ways that they could be taxed.
Bill Ackman, the vociferous hedge-fund manager based in New York, called the California union’s proposal “an expropriation of private property” in a post on X this week.
The California measure would take an unprecedented step toward taxing assets, while Ackman proposed an idea that would aim to address the loophole known as “buy, borrow, die” that allows rich Americans to live tax-free off their paper wealth.
Ackman proposed a tax on personal loans backed by appreciated assets, when the loan amount is more than the basis of the investment. The proposal zeroes in on the fact that many billionaires’ wealth is largely tied up in noncash investments, such as stock, bonds, property or art. They are able to borrow money against the gains in their holdings without having to sell the underlying assets and incur capital-gains taxes.
Ackman’s post received an endorsement on X from fellow billionaire Mark Cuban, who is often on the opposite side of political debates from Ackman, an outspoken Trump supporter.
Changes to the state and federal tax codes should be part of a broader debate about tax reform, but the California ballot measure cannot “solve every inequity in the tax code at once,” Jimenez said.
Levies on the country’s richest residents have popped up in multiple forms in recent years, including in Massachusetts, where voters in 2022 approved a 4% surtax on annual incomes over $1 million. New York City Mayor Zohran Mamdani has said he would fund an ambitious affordability agenda with new taxes on companies and the wealthy. Such proposals would need the approval of the state legislature and New York Gov. Kathy Hochul.