Executives in the cryptocurrency industry are speaking out strongly against California’s proposed billionaire wealth tax, which would impose a one-time 5% levy on net worth above $1 billion — including unrealized gains on assets such as startup equity and crypto holdings. Industry leaders warn the measure could drive founders, venture capital and skilled workers out of the state, undermining innovation and capital formation in the heart of the U.S. tech and crypto ecosystem.
What the Proposed Tax Entails
Officially known as the 2026 Billionaire Tax Act, the proposal seeks to impose a one-time 5% tax on net wealth exceeding $1 billion, including unrealized gains on private companies, stock and long-term crypto holdings. The revenue — potentially in the tens of billions — is aimed at funding state healthcare and social programs.
Supporters argue the tax ensures the ultra-rich contribute more to public services, especially amid large budget gaps, particularly in healthcare. However, critics say the structure — particularly its application to unrealized gains — could have serious economic consequences.
Industry Concerns: Capital Flight and Innovation Risk
Crypto executives and tech leaders have voiced alarm that the tax could trigger capital flight, with wealthy residents relocating to states with more favorable tax environments and taking their investment, jobs, and philanthropic activity with them.
- Jesse Powell, Kraken co-founder, warned the tax could be “the final straw,” leading billionaires to take their spending, jobs and philanthropy elsewhere.
- Hunter Horsley, CEO of Bitwise, echoed concerns that taxing unrealized gains could undermine founder confidence and long-term investment in California.
- Nic Carter (Castle Island Ventures) and Jeff Park (ProCap BTC) also warned that a one-time wealth tax in a highly mobile capital market could signal future taxation risks, prompting relocation of businesses and capital.
Critics argue that taxing unrealized gains — including equity in startups and crypto assets — could force founders to sell parts of their companies or take on debt simply to meet tax liabilities, even when they haven’t realized any cash profit.
Broader Economic Implications
Industry leaders warn that the tax’s impact could extend beyond individual relocations:
- Entrepreneur migration: Wealthy founders and executives might shift residency to more tax-friendly states like Texas or Florida, a trend already seen in parts of the tech community.
- Startup capital shifts: Venture capital funds and early-stage startups could prefer jurisdictions with more predictable tax environments.
- Talent mobility: Skilled workers attracted to California’s innovation hubs might follow capital and founders to other states.
Chamath Palihapitiya, a prominent venture capitalist, warned that such a tax could “kill entrepreneurship in California” by creating significant cash-flow challenges for founders whose wealth is tied up in illiquid assets like startup equity.
Supporters of the Proposal and Counterarguments
Supporters, including some state lawmakers and advocates, argue that the tax would help address pressing needs in healthcare, childcare and education by tapping wealth that has largely avoided such levies. They maintain that asking the ultra-wealthy to contribute more is a matter of fairness as inequality concerns grow.
Representative Ro Khanna (D-CA) has defended the initiative, saying revenue from the tax could strengthen public services and, in turn, support long-term innovation by addressing systemic social challenges.
Path Forward and Political Debate
The measure must collect nearly 875,000 valid signatures to qualify for the November 2026 ballot, and debate over its merits is intensifying as supporters push for funding solutions and opponents caution against unintended economic fallout.
If it reaches voters, the campaign will likely become a flashpoint on questions of taxation, economic competitiveness, and California’s role as a global innovation leader.
Bottom Line
Crypto industry executives and tech founders alike are united in their concern that California’s proposed 5% billionaire wealth tax, especially if applied to unrealized gains, could drive capital, talent and innovation away from the state — potentially weakening the deeply interconnected tech and crypto ecosystems that have long defined Silicon Valley and its economic dynamism. The debate continues as stakeholders on both sides prepare for what could become one of the most consequential tax policy battles in the state’s history.
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