U.S. Representative Ro Khanna, a Democrat representing Silicon Valley, has proposed a novel approach to quell the backlash from tech elites regarding his endorsement of a wealth tax: a comprehensive crackdown on government fraud. This initiative aims to bolster public trust and ensure that any additional tax revenue, particularly from potential wealth taxes, is not squandered.
Khanna recently found himself at odds with some tech industry donors and allies after publicly supporting a wealth tax. This comes as labor groups in California are pushing to place a statewide tax on billionaires on the November ballot. The prospect of such a tax has already spurred warnings from some wealthy Californians who have indicated they might leave the state if it passes, with some even vowing to support a primary challenger to Khanna in the upcoming elections.
In an interview with CNBC, Khanna outlined his plan to leverage his position on the House Oversight and Government Reform Committee to launch a bipartisan effort targeting state-level fraud. The objective is to ensure that any “tax windfall” is effectively utilized for essential services like healthcare, rather than being lost to mismanagement or corruption.
“If you want to advocate for Medicare for All, to advocate for higher taxes, you have to have the public trust,” Khanna stated. “People need to see a clear accounting of where their money is going. Pervasive corruption and waste in government undermine support for progressive ideals.”
Khanna indicated his intention to collaborate with a Republican colleague on this anti-fraud initiative, drawing a parallel to his recent bipartisan success with Representative Thomas Massie, R-Ky., which led to the release of documents pertaining to Jeffrey Epstein. Khanna envisions a similar approach, potentially commissioning a bipartisan Government Accountability Office report on state-level fraud and holding public hearings.
This push by Khanna follows recent reports from the California State Auditor highlighting potential fraud within the state. Concurrently, alleged fraud cases in Minnesota, some of which led to indictments in 2022, have also garnered renewed national attention from Republican lawmakers and the Trump administration. Critics of Khanna’s wealth tax stance often point to these instances of fraud as evidence that such tax proposals are unworkable.
Prominent tech investor Chamath Palihapitiya, a supporter of former President Trump, expressed skepticism on X, formerly Twitter: “If, after audits and zero-based budgets, there are revenue gaps, I’d support a wealth tax. Until then, you and your ilk are just incentivizing more fraud, voter manipulation, and larceny.”
Khanna stated that his new oversight initiative is a direct response to “feedback from constituents in my district and leaders” concerning his support for a wealth tax. He emphasized that the investigation would extend beyond the reported fraud in California and Minnesota, and that involving a Republican partner would ensure the effort remains non-partisan.
“This isn’t about blue states versus red states,” Khanna asserted. “While we’ve seen reports from Minnesota and California, the issue is broader. We need to examine state governments, expose where fraud is occurring, and identify solutions.” Both California and Minnesota are currently led by Democratic governors.
The California wealth tax proposal, officially the “2026 Billionaire Tax Act,” aims to impose a one-time 5% tax on the assets of the state’s billionaires to address an anticipated shortfall in the state’s healthcare budget. The measure is being championed by the Service Employees International Union-United Healthcare Workers West labor union.
For the proposal to appear on the ballot, it must first gather sufficient signatures. If successful, California voters will ultimately decide on its implementation. Tech leaders who oppose the measure are particularly concerned that it could be applied to unrealized gains. This means that founders of startups, whose net worth is largely based on the paper value of their private stock, could be liable for the tax even if their wealth is illiquid and the company is not yet profitable.
Khanna acknowledged these concerns, reiterating his support for a wealth tax to fund healthcare initiatives both in California and federally. However, he stressed the importance of developing mechanisms to protect “startup paper billionaires with restricted stock” and ensure that illiquid assets are not unfairly targeted. He believes that the tax can be structured in a way that avoids penalizing such founders.
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