Did California lose Larry Page? The Google and Alphabet cofounder, who left day-to-day operations in 2019, has seen his net worth soar in the years since—from around $50 billion at the time of his departure to somewhere approximating $260 billion today. (Leaving his job clearly didn’t hurt his wallet.) Last year, a proposed ballot initiative in California threatened billionaires like Page with a one-time 5 percent wealth tax—prompting some of them to consider leaving the state before the end of the year, when the tax, if passed, would retroactively kick in. Page seems to have been one of those defectors; The Wall Street Journal reported that he recently spent more than $170 million on two homes in Miami. The article also indicated his cofounder Sergey Brin also might become a Florida man.
The Google guys, formerly California icons, are only two of approximately 250 billionaires subject to the plan. It’s not certain whether many of them have departed for Florida, Texas, New Zealand, or a space station. But it is clear that a lot of vocal billionaires and other super rich people are publicly losing their minds about the proposal, which will appear on the November ballot if it garners around 875,000 signatures. Hedge fund magnate Bill Ackman calls it “catastrophic.” Elon Musk, the world’s richest man, boasted that he already pays plenty of taxes, so much so that one year he claims his tax return broke the IRS computer.
Still, when considered as a percentage of income, even the big sums paid by some billionaires are way lower than the tax rates many teachers, accountants, and plumbers pay every year. If Musk, currently worth an estimated $716 billion, had to pay a 5 percent wealth tax, he’d probably manage to scrape by with a $680 billion nest egg—enough to buy Ford, General Motors, Toyota, and Mercedes, and still remain the world’s richest person. (In any case, he’s safe from California taxes; a few years ago he moved to Texas.)
California’s politicians, including Governor Gavin Newsom, are generally opposed to the initiative. A glaring exception is Representative Ro Khanna, who said to WIRED in a statement that he’s on board with “a modest wealth tax on billionaires to deal with staggering inequality and to make sure people have healthcare.”
Khanna might pay a price for taking on the wealthy and may face a primary challenge backed by oligarch bucks because of it. A safer position for Bay Area politicians is the one taken by San Jose mayor Matt Mahan. He recently posted a tweet stream opposing the bill, saying that if California passed the wealth tax it would be cutting off its nose to spite its face. When I speak to Mahan, he emphasizes the risk of California standing alone in taxing the net worth of billionaires. “It puts at risk our innovation economy that is the real engine of economic growth and opportunity,” he says. (Mahan isn’t super rich, but he is billionaire-adjacent: He once was CEO of a company cofounded by former Facebook president Sean Parker.)
Because of the mobility of rich people, California does have real worries about the impact of a state wealth tax. Not being a billionaire myself, I find the idea baffling—moving away from one’s ideal home simply to avoid a tax that makes no impact on your living situation seems, to use Mahan’s words, like cutting off your nose to spite your face.
Also, I don’t see why an exodus of billionaires necessarily means the end of Silicon Valley as the heart of tech innovation. If you want to become a billionaire, there’s no place better than the Bay Area, with an ecosystem that nurtures innovative businesses. That’s not changing. A few years ago, some tech people moved to Miami, claiming it was going to become the new Silicon Valley. That didn’t happen.
Nonetheless, some billionaires seem determined to leave, which would indeed render a state wealth tax counterproductive. If we are to tax billionaires fairly, it would seem best to handle it nationally. Indeed, Senator Elizabeth Warren and a number of lawmakers in the House and Senate have that exact idea in mind. The “Ultra Millionaire Tax Act,” first proposed in 2021 and reintroduced early last year, would impose a 2 percent tax on the net worth of households over $50 million, with a 1 percent surtax on wealth exceeding $1 billion.
Don’t hold your breath waiting for that to pass from the same Congress that just green-lit giant tax cuts for the rich while curtailing health care subsidies for the masses. It’s unlikely that any legislature, state or local, will do what Mahan and others suggest—closing loopholes that allow the rich to duck their fair share of taxes. Consider the most egregious loophole, the carried interest provision that allows hedge fund managers to pay low rates on management fees. Everyone agrees it’s a scam—even Donald Trump vowed to end it—yet it has consistently eluded sunset. The rich weaponize their riches to game the lawmakers.
That’s why the California wealth tax is so threatening to the wealthy. A ballot initiative goes straight to the people. In our K-shaped economy, struggling families get constant reminders that the fortunate are feasting while paying taxes at a lower rate than working stiffs. Even more infuriating, many modern Daddy Warbucks types seem to consider it their due. Their role model is the president of the United States, who has boasted about paying as little in taxes as possible. When Hillary Clinton mentioned in a 2016 debate that her opponent paid no taxes in some years, Donald Trump said, “That makes me smart.” And that makes ordinary taxpayers … dumb?
The proposed wealth tax ballot is no act of genius. It’s a blunt instrument with some glaring flaws. For instance, it’s possible that some people might be billionaires on paper with stock in a company that’s overvalued—they’d still have to come up with the scratch to pay. Others might have to sell stock prematurely. And of course, there’s the fact that billionaires can escape the tax altogether by leaving the state.
But rational objections might well be overwhelmed by voter frustration. Putting a wealth tax on a ballot—where lobbyists and donors can’t kill it or water it down—seems like the only way to shake the pockets of those moneybaggers so that some of the coins fall out. When I mention this to Mayor Mahan, he unhappily agrees. “This ought to be a massive wake-up call to our leaders in Washington in particular, that they need to take bolder action to make our tax code fairer, to make our systems more efficient,” he says.
One might expect smart billionaires to push for those bold actions, as a defense against more onerous wealth taxes. Instead, in interviews and social network posts, the rich are throwing temper tantrums. One particularly alarmist response came from the four self-described “besties”of the popular All In podcast. As far as I can ascertain, only one is an actual California billionaire: venture capitalist Chamath Palihapitiya. But all are loaded with the spoils of tech investments, including VC David Sacks, who also serves as Donald Trump’s AI and crypto czar. In a recent episode, David Friedberg, who once sold his climate-friendly company to Monsanto for $1.1 billion, took the lead in inveighing against the wealth tax. He warned that the billionaire tax is a Trojan horse for a government surveillance state where every citizen’s personal property will be subject to a tax, even the jewelry your grandmother gave you! “The reason they’re calling it a billionaire tax is to make it easier for people to vote for it and sign up for this entirely new tax system that they’re proposing to put on all Americans,” he said. (It’s hard to imagine a legislator actually suggesting this. In any case, no such proposal exists.) Sacks jumped in to agree. “It’s a taking, it’s an asset seizure!” he railed.
Dudes, every tax is a “taking.” The besties aren’t raising objections to payroll taxes, where the government grabs a huge chunk of people’s salaries, or property taxes, where the government assesses the value of a home and takes a percentage. But when it comes to taking a share of vast stock holdings and the value of superyachts, these plutocrats sound like Branch Davidians. (To be fair, Friedberg mentioned what he considers more reasonable alternatives to a wealth tax, like raising the capital gains tax rate or imposing taxes when people borrow against their stock holdings. But he specified that he opposed those measures.)
If the billionaire wealth tax passes, it will owe much of its success to billionaire hubris. Super rich tech figures constantly refer to themselves as wealth creators, but that wealth was made possible by tax-funded breakthrough technologies that made their companies possible in the first place. Sure, many of those founders were smart and worked hard to build their companies. But without government research, which among other things led to microprocessors and the internet, many of those billionaires might now be working in cubicles, pulling the cranks of mechanical adding machines.
Instead of sneaking out of the state that made them rich, fat cats should take a lesson from Nvidia cofounder Jensen Huang, whose net worth is around $155 billion. At CES this week, an interviewer asked his views on the wealth tax. “I haven’t thought about it even once,” said Huang, who would have to pay about $8 billion if the ballot initiative passed. But he understood that even that crazy sum is a relative speed bump compared to the gains that would come from sticking around. “We work in Silicon Valley because that’s where the talent pool is,” he said. When the interviewer prodded him that a lot of people were “reflecting” on the wealth tax, Jensen doubled down. “Not this person,” he said. “This person is trying to build the future.” What a contrast to those billionaires trying to hang on every dollar while starving the government that helped them build their fortunes.
This is an edition of Steven Levy’s Backchannel newsletter. Read previous newsletters here.
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