Silicon Valley Billionaires Panic Over California’s Proposed Wealth Tax
Did California lose Larry Page? The Google and Alphabet co-founder, who left day-to-day operations in 2019, has seen his net worth rise in the years since — from around $50 billion at the time of his departure to somewhere around $260 billion today. (Leaving his job clearly did not hurt his wallet.) Last year, a proposed ballot initiative in California threatened billionaires like Page with a one-time 5 percent wealth tax – causing some of them to consider leaving the state before the end of the year, when the tax, if passed, would retroactively kick in. Page seems to have been one of those defectors; The Wall Street Journal reported that he recently spent more than $170 million on two homes in Miami. The article also indicated that its co-founder Sergey Brin may also become a Florida man.
The Google guys, formerly California icons, are just two of about 250 billionaires subject to the plan. It is not certain whether many of them have left for Florida, Texas, New Zealand, or a space station. But it's clear that many vocal billionaires and other super-rich people are publicly losing their minds over the proposal, which will appear on the November ballot if it garners about 875,000 signatures. Hedge fund magnate Bill Ackman calls it “catastrophic”. Elon Musk, the richest man in the world, claimed that he already pays a lot of taxes, so much so that he claimed his tax return one year broke the IRS computer.
However, when considered as a percentage of income, even the large sums paid by some billionaires are much lower than the tax rates that many teachers, accountants and plumbers pay each year. If Musk, currently worth an estimated $716 billion, had to pay a 5 percent wealth tax, he would likely end up with a $680 billion nest egg — enough to buy Ford, General Motors, Toyota and Mercedes, and still remain the richest person in the world. (In any case, he is safe from California taxes; a few years ago he moved to Texas.)
California's politicians, including Governor Gavin Newsom, are generally against to the initiative. A notable exception is Representative Ro Khanna, who told WIRED in a statement that he's on board with “a modest wealth tax on billionaires to deal with dire inequality and to make sure people have health care.”
Khanna may pay a price for adopting the rich and may face a primary challenge backed by oligarch bucks as a result. A safer position for Bay Area politicians is the one taken by San Jose Mayor Matt Mahan. He recently posted a tweet stream against the bill, saying that if California passed the wealth tax, it would cut off his nose to spite his face. When I talk to Mahan, he emphasizes the risk that California stands alone in taxing the net worth of billionaires. “It jeopardizes our innovation economy, which is the real engine of economic growth and opportunity,” he says. (Mahan isn't super rich, but he's a billionaire—after all: he was once CEO of a company co-founded by former Facebook president Sean Parker.)
Because of the mobility of wealthy people, California does have real concerns about the impact of a state wealth tax. I'm not a billionaire myself, I find the idea mind boggling – moving away from one's ideal home just to avoid a tax that doesn't affect your living situation seems, to use Mahan's words, like cutting off your nose to spite your face.
I also don't see why an exodus of billionaires necessarily means the end of Silicon Valley as the heart of tech innovation. If you want become a billionaire, there is no place better than the Bay Area, with an ecosystem that nurtures innovative companies. That does not change. A few years ago, some technology people moved to Miami, claiming it would become the new Silicon Valley. That didn't happen
