California’s proposed wealth tax has been a topic of intense debate for quite some time, after lawmakers pushed for a 5% tax on the ultra-wealthy. This move has already led to the exodus of several billionaires and top entrepreneurs from the Golden State.
While the proposal seeks to tax wealth tied up in non-taxable assets such as stock options, family trusts, and luxury items, it has drawn sharp criticism from business leaders and venture capitalists in Silicon Valley. Critics have warned that the move could further accelerate the relocation of prominent tech executives and investors to lower-tax states such as Texas and Florida.
The ones who have already fled the state include Facebook chief Mark Zuckerberg, Oracle founder Larry Ellison, Google’s Larry Page, and PayPal chief Peter Thiel, among others. The latest high-profile name is the legendary “E.T.” director Steven Spielberg, who has moved to Manhattan, the New York Post reported.
Many others are reportedly planning to leave California and move their businesses to lower-tax states as voters eye the controversial wealth tax. At the same time, some have decided to stay, saying Silicon Valley continues to be the world’s biggest hub for technology, investors and skilled workers.
What is the ‘billionaire tax’? All about it
Under the tax proposal, which could be put to voters this November, any California resident with a net worth of more than $1 billion would have to pay a one-off, 5% tax on their assets, with the proceeds going towards education, food assistance and healthcare programmes in the state.
The “billionaire tax’ is being actively pushed by the labour union, Service Employees International Union-United Healthcare Workers West. If approved, the tax would retroactively apply to residents from 1 January, and billionaires would be given five years to pay the amount, the Guardian reported.
Proponents argue that it will raise tens of billions of dollars to go toward the state’s health care shortfalls, noting that it targets wealth that often goes untaxed.
“The ultra-wealthy often avoid income taxes by minimizing taxable income, relying instead on assets like yachts and rare coin collections. The debate continues on how best to ensure equitable taxation among the wealthiest individuals,” Binance said in a blog post.
California has long relied on its billionaire population, one of the largest in the nation, to help fund the state’s budget. Critics of the tax proposal, including Venture Capitalist Chamath Palihapitiya, warn that the move could actually worsen the situation instead of solving the state’s budget deficit.
