The push for a wealth tax in California, championed by Representative Ro Khanna, is igniting a fierce debate within Silicon Valley, threatening to split Democratic ranks and alienate key figures in the tech industry. Labor unions are spearheading a ballot initiative aimed at imposing a one-time 5% tax on the assets of the state’s billionaires, ostensibly to address a projected shortfall in healthcare funding. This move has drawn sharp criticism from tech leaders who warn of a potential exodus from the Golden State should the measure pass.
Khanna, in a recent social media response, echoed historical sentiments, sarcastically remarking, “I will miss them very much” to those threatening to leave, drawing parallels to criticisms faced by President Franklin D. Roosevelt. This stance has not only fueled backlash from industry heavyweights but has also spurred calls for his primary challenge.
Martin Casado, a partner at the prominent venture capital firm Andreessen Horowitz, expressed his disillusionment in a public post, stating, “Ro has done a speed run alienating every moderate I know who has supported him.” He went on to suggest that such alienation would make voting him out “all the more gratifying.” Notably, associates from Andreessen Horowitz and Y Combinator, the esteemed startup accelerator led by CEO Garry Tan, are among the significant donors to Khanna’s campaign. Tan himself publicly called it “Time to primary him.”
The proposed “2026 Billionaire Tax Act,” driven by the Service Employees International Union-United Healthcare Workers West, targets a single tax on the accumulated wealth of California’s wealthiest individuals. If it secures enough signatures to qualify for the ballot, voters will decide its fate, with potential retroactive application to the beginning of 2026.
A central point of contention for tech investors, executives, and entrepreneurs is the prospect of taxing unrealized gains. This means that founders whose net worth is tied to the valuation of their private stock, even if illiquid, could be compelled to pay taxes on assets they have not yet monetized. Alexis Ohanian, co-founder of Reddit and a venture investor, articulated this concern, stating, “But the answer is definitely not taxing unrealized gains.”
A spokesperson for Representative Khanna, Sarah Drory, emphasized his commitment to technology and entrepreneurship, pointing to his co-authorship of the CHIPS and Science Act. She clarified that while Khanna supports a “modest wealth tax on billionaires” to address inequality and healthcare needs, he also advocates for “common sense workarounds for startup founders whose companies are not profitable and who have illiquid stock.”
California Governor Gavin Newsom, often seen as a potential presidential contender in 2028, has expressed reservations about state-level billionaire taxes, advocating for a more pragmatic approach that considers the broader economic landscape. However, national sentiment, reflected in polling data, indicates substantial public support for increasing taxes on high earners. A Pew Research Center poll revealed that a majority of Americans favor higher taxes on those earning over $400,000, with an even stronger majority among Democrats.
Meanwhile, Republicans are reportedly gaining traction in Silicon Valley, a region historically leaning Democratic, attracting the attention of some tech billionaires. This political shift is underscored by the increasing engagement of tech leaders with President Donald Trump, who has integrated several prominent figures from the tech industry into his administration.
Despite the controversy, Khanna’s deep blue congressional district in California offers him a significant electoral buffer. He secured a decisive victory by over 30 points in 2024, making a Republican flip in 2026 highly improbable.
Khanna has reiterated his stance on wealth taxation, arguing that the prospect of a 1-2% tax on substantial wealth would not deter entrepreneurs from innovating or capitalizing on innovation hubs. This economic perspective, however, is contested by figures like Vinod Khosla, founder of Sun Microsystems and Khosla Ventures, who predicts that top talent and businesses seeking wealth generation will likely relocate to other states, advising enterprises to consider moving key personnel. This ongoing dialogue highlights the complex interplay between progressive taxation policies, the realities of startup finance, and the economic dynamics of a highly competitive tech landscape.
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