San Jose Mayor Matt Mahan has voiced strong opposition to a proposed statewide ballot measure that would impose a one-time 5% tax on the net worth of billionaires in California. Mahan, who assumed office in the heart of Silicon Valley in 2023, argued in a series of social media posts that the initiative, if passed, would ultimately harm the majority of California residents and its crucial innovation economy.
“We need a rising economic tide to lift all boats, not a political plan that will sink California’s innovation economy,” Mahan stated. He believes that while addressing income inequality is important, this particular measure is a “political ploy” that will disproportionately burden working individuals. “The people who lose in the long run are California families who will be asked to foot more of the bill for government services and infrastructure,” he added.
The proposed “2026 Billionaire Tax Act,” spearheaded by the Service Employees International Union-United Healthcare Workers West, aims to collect an estimated $100 billion through 2031 by taxing the assets of California’s wealthiest individuals. This revenue is intended to address an anticipated shortfall in the state’s healthcare budget. However, a key point of contention, and a major driver of opposition from the tech community, is the potential for the tax to apply to unrealized capital gains. This means that even founders of successful startups whose wealth is tied up in the illiquid, paper value of their private stock could be forced to pay taxes on assets they haven’t yet cashed out.
This concern has fueled a vocal backlash from prominent tech investors and executives. Many argue that such a tax would incentivize companies and entrepreneurs to relocate to more tax-friendly states, potentially eroding California’s status as a global technology hub. Venture capitalist David Sacks, who also serves as a special advisor on crypto and AI to President Donald Trump, suggested that “Austin will replace SF as the tech capital” if such policies are enacted. Reports indicate that tech luminaries like Peter Thiel and Google co-founder Larry Page have also considered leaving the state due to the evolving tax landscape.
The debate has become particularly challenging for Democratic Representative Ro Khanna, whose district encompasses a significant portion of Silicon Valley. While Khanna has expressed support for a “modest wealth tax on billionaires to deal with staggering inequality and to make sure people have health care,” he also acknowledges the need for “commonsense work-arounds for startup founders whose companies are not profitable and who have illiquid stock.” This nuanced stance reflects the complex interplay between addressing societal inequalities and fostering a robust business environment.
The proposed ballot measure requires approximately 875,000 signatures to qualify for the ballot. If successful, California voters will ultimately decide on the initiative, which, if enacted, would be retroactive to January 1, 2026. The core of the disagreement lies in how to balance the state’s fiscal needs with the potential economic ramifications of taxing unrealized gains and potentially driving away its most significant economic contributors. Mahan suggests that more effective solutions to income inequality might involve addressing existing tax loopholes that allow for the deferral or avoidance of taxes on capital gains.
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