Why Silicon Valley is fighting California’s proposed wealth tax

California is facing a push from a health care union to implement a one-time 5% wealth tax on individuals worth over $1 billion. The union argues the tax is necessary to offset deep cuts to health care that President Trump signed into law last year. The proposed tax, which would apply retroactively to January 1, 2026, is expected to raise about $100 billion from roughly 200 individuals. However, the initiative has triggered significant resistance from the tech sector in Silicon Valley.

According to a Friday report by the New York Post, the proposed wealth tax would hit founders on their voting shares rather than the actual equity they own. This structure would heavily impact founders utilizing dual-class stock—a structure where different classes of shares have different voting rights. For example, Google co-founder Larry Page owns about 3% of Google’s equity but holds roughly 30% of its voting power. Under the proposal, he would owe taxes based on that roughly 30% voting control.

David Gamage, a University of Missouri law professor who helped craft the proposal, argued that founders would not be forced to sell. “If your startup fails, you pay nothing,” Gamage said, explaining that founders of private companies could instead defer payments until their shares are eventually sold. However, tax expert Jared Walczak told the Post that calculating valuations for non-public companies is inherently difficult, noting that different appraisers could reach vastly different conclusions without any dishonesty.

The Wall Street Journal reported that members of the Silicon Valley elite have organized a Signal chat group called Save California to coordinate opposition, labeling the proposal as Communism and poorly defined. Some high-profile figures are already taking precautionary measures, with Page reportedly dropping $173.4 million on Miami waterfront properties between last month and early January.

The proposal must secure 875,000 signatures to qualify for a ballot initiative—a public petition process that brings measures to a public vote—in November. While California Governor Gavin Newsom is fighting the proposal, stating that he has no doubt the measure will be defeated, the health care union remains firm. Debru Carthan, an executive committee member of the union, defended the initiative as an effort to keep emergency rooms open and save patient lives, while characterizing departing tech figures as outrageously greedy.

Why it matters

The proposal highlights a growing friction between state-level fiscal policy and the tech industry’s unique capital structures. Specifically, it raises critical questions about how tax authorities value non-liquid assets, such as voting control, rather than realized financial wealth.