Some of the most prominent voices in crypto and tech are sounding the alarm over California’s proposed billionaire wealth tax, arguing it risks pushing founders, capital, and innovation out of the state.
The proposal, set to appear as a ballot initiative in 2026 if it qualifies, would impose a 5% tax on residents with net wealth above $1 billion. While supporters frame it as a way to fund public services, critics say it could fundamentally change where entrepreneurs choose to build and stay.
Why Executives Say the Risk Is Structural, Not Political
Industry leaders argue the concern isn’t just the tax rate itself, but how the policy reshapes incentives.
Jesse Powell, co-founder of Kraken, warned that the measure could be a “final straw” for many ultra-high-net-worth founders. The fear is that once relocation becomes rational, California doesn’t just lose tax revenue, it loses long-term job creation, spending, and investment ecosystems.
🇺🇸 NEW: Crypto execs say California’s 5% billionaire wealth tax could drive founders and capital away, risking innovation. pic.twitter.com/44ns7YRBkw
— Cointelegraph (@Cointelegraph) December 29, 2025
Hunter Horsley, CEO of Bitwise, echoed similar concerns, arguing that mobile capital will naturally seek jurisdictions with clearer and more predictable rules.
At the core of the pushback is uncertainty. Executives say innovation-heavy sectors like blockchain and artificial intelligence rely on stable planning horizons, not shifting frameworks that retroactively redefine wealth and risk.
Unrealized Gains Raise Red Flags for Founders
One of the most controversial aspects of the proposal is that it would apply to unrealized gains, not just liquid assets.
Critics argue this could force founders to sell meaningful stakes in private companies or large crypto positions simply to meet tax obligations. That kind of pressure, they say, risks distorting ownership structures, weakening founder control, and discouraging long-term investment strategies.
For entrepreneurs whose net worth is tied to illiquid assets, the concern isn’t theoretical, it’s operational.
Doubts Over How the Money Would Be Used
Beyond capital flight, skepticism also centers on how the state would manage the funds.
Some executives point to past reports from the state auditor highlighting spending inefficiencies as a reason to question whether the proceeds would be deployed effectively. This distrust compounds resistance, particularly among founders who already feel state policy has become unpredictable.
Under the proposal, most of the revenue would be directed toward healthcare and state assistance programs, but critics argue that good intentions alone don’t offset structural economic risks.
What the Measure Would Do
The initiative, formally titled the “2026 Billionaire Tax Act”, would impose a one-time 5% tax on net wealth above $1 billion, assessed as of January 1, 2026.
Those affected could choose to pay the tax in a single lump sum or spread payments over five years with interest. Before any of that happens, however, the measure must still gather enough signatures to qualify for the November 2026 ballot.
A Test Case for Innovation-Friendly Policy
For now, the proposal remains hypothetical. But for many in crypto and tech, it has already become a signal.
The debate isn’t just about billionaires, it’s about whether California continues to position itself as a long-term home for high-risk, high-reward innovation, or whether capital simply decides it’s easier to build elsewhere.
If the measure advances, the response from founders may offer an early answer.
