Silicon Valley billionaires panic over California’s proposed wealth tax

Did California lose Larry Page? The Google and Alphabet co-founder, who left his day-to-day operations in 2019, has seen his net worth soar in the years since, from around $50 billion at the time of his departure to around $260 billion today. (Leaving his job clearly didn’t hurt his wallet.) Last year, a ballot measure in California threatened billionaires like Page with a one-time 5 percent wealth tax, prompting some of them to consider leaving the state before the end of the year, when the tax, if passed, would take effect retroactively. Page appears to have been one of these defectors; The Wall Street Journal reported that he recently spent more than $170 million on two homes in Miami. The article also noted that its co-founder, Sergey Brin, could also become a Florida man.

The Google guys, once Californian icons, are just two of the approximately 250 billionaires subject to the plan. It’s not clear whether many of them went to Florida, Texas, New Zealand or a space station. But it’s clear that many vocal billionaires and other very wealthy 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 tycoon Bill Ackman describes it as “catastrophic”. Elon Musk, the richest man in the world, boasted that he already pays a lot of taxes, so much so that one year he asks for his tax return broke the IRS computer.

Yet when considered as a percentage of income, even the large sums paid by some billionaires are far lower than the tax rates many teachers, accountants and plumbers pay each year. If Musk, currently worth an estimated $716 billion, were to pay a 5% wealth tax, he would likely get by with a nest egg of $680 billion, enough to buy Ford, General Motors, Toyota and Mercedes, and always remains the richest person in the world. (It’s sheltered from California taxes anyway; a few years ago he moved to Texas.)

California politicians, including Governor Gavin Newsom, are generally opposed on the initiative. One glaring exception is Rep. Ro Khanna, who told WIRED in a statement that he’s on board with “a modest billionaire wealth tax to address staggering inequality and to ensure people have access to health care.”

Khanna could pay the price for going after the rich and could face a main challenge supported by the oligarchs because of that. A safer position for Bay Area politicians is that taken by San Jose Mayor Matt Mahan. He recently posted a tweet opposing the bill, saying that if California passed the wealth tax, it would cut off his nose, despite his face. When I speak to Mahan, he points out the risk that California will be left alone to tax the net worth of billionaires. “This puts at risk our innovation economy, which is the true engine of economic growth and opportunity,” he said. (Mahan is not very rich, but he is close to billionaires: he was once CEO of a business co-founded by former Facebook president Sean Parker.)

Because of the mobility of the wealthy, California has real concerns about the impact of a wealth tax. Not being a billionaire myself, I find the idea puzzling: moving away from your ideal home simply to avoid a tax that has no impact on your life situation seems, in Mahan’s words, like cutting off your nose to spite your face.

Furthermore, I don’t see why an exodus of billionaires necessarily means the end of Silicon Valley as the heart of technological innovation. If you want become For a billionaire, there’s no better place than the Bay Area, with an ecosystem that nurtures innovative businesses. That doesn’t change. A few years ago, tech people moved to Miami, saying it was going to become the new Silicon Valley. That this did not happen.