California lets interest groups propose measures for the state ballot. Anyone who gathers enough signatures (currently 874,641) can put their hare-brained plans before voters during the next election year. This year, the big story is the 2026 Billionaire Tax Act, a 5% wealth tax on California's billionaires. Your views on this will mostly be shaped by whether or not you like taxing the rich, but opponents have argued that it's an especially poorly written proposal: It includes a tax on "unrealized gains", like a founder's share of a private company which hasn't been sold yet. This could be an existential threat to the Silicon Valley model of building startups that are worth billions on paper before their founders see any cash. Since most billionaires keep most of their wealth in stocks, any wealth tax will need some way to reach these (cf. complaints about the "buy, borrow, die" strategy for avoiding taxation). But there are better ways to do this (for example, taxing at liquidation and treating death as a virtual liquidation event), other wealth tax proposals have included these, and the California proposal doesn't. It appears to value company stakes by voting rights rather than ownership, so a typical founder who maintains control of their company despite dilution might see themselves taxed for more than they have. Garry Tan explains the math here with reference to Google. However, Current Affairs has a good article (?!) that pushes back, saying the proposal exempts public companies like Google. Although private companies would still be affected, this would be so obviously unfair that founders would easily win an exemption based on a provision allowing them to appeal nonsensical results. Still, some might counterobject that proposed legislation is generally supposed to be good, rather than so bad that its victims will easily win on appeal. It's retroactive, applying to billionaires who lived in California in January, even though it won't come to a vote until November. Proponents argue that this is necessary to prevent billionaire flight; opponents point out that alternatively, billionaires could flee before the tax even passes (as some have already done). One plausible result is that the tax fails (either at the ballot box or the courts), but only after spurring California's richest taxpayers to flee, leading to a net decrease in revenue. Some people propose that it could decrease state revenues overall even if it passed, if it drove out enough billionaires, though others disagree. Pro-tech-industry newsletter Pirate Wires finds that 20 out of 21 California tech billionaires interviewed were "developing an exit plan" and quotes an insider saying that "if this tax actually passes, I think the technology industry kind of has to leave the state". Even Gavin Newsom, hardly known for being an anti-tax conservative, has argued that it "makes no sense" and "would be really damaging". The ACX legal and economic analysis team (Claude, GPT, and Gemini) doubt the direst warnings, but agree that the tax is of dubious value and its provisions poorly suited to Silicon Valley. https://www.astralcodexten.com/p/seiu-delenda-est
