The proposed California "entrepreneur's tax" is not a one-time levy on billionaires. It's viewed as the first step toward an annual tax on paper wealth, with thresholds planned to drop to $25M. This would impact founders with illiquid equity post-Series B, forcing a mass exodus before an IPO.

A provision in the proposed California wealth tax calculates an individual's net worth not by the market value of their shares, but by multiplying their voting power by the company's total market cap. This disproportionately affects founders with super-voting stock, like those of Google.

The implementation of wealth taxes could burst market bubbles. Since these taxes must be paid in cash, holders of illiquid assets (like stocks or real estate) are forced to sell. This forced selling creates downward pressure on prices, potentially triggering a broader market downturn.

California is on the verge of a massive tax revenue surge from upcoming IPOs of companies like SpaceX and OpenAI. However, a proposed wealth tax on illiquid assets is causing tech leaders to relocate, potentially costing the state the very economic boom it needs to balance its budget.

Congressman Ro Khanna proposes a tax on the total net worth of individuals with over $100 million. Unlike an income or capital gains tax, this targets unrealized wealth, forcing the liquidation of assets like stocks to generate the cash needed to pay the tax.

Billionaire wealth is largely illiquid and tied to asset values. A large-scale wealth tax would force mass sales, crashing the market value of those assets. The money is only 'there' on paper until you try to actually collect it, at which point its value collapses.

A proposed wealth tax in California triggered a significant flight of capital and high-net-worth individuals, even without becoming law. The key factor was the failure of politicians to uniformly condemn the proposal, which was perceived as a threat to fundamental property rights, signaling a hostile business climate.

Threatening to confiscate wealth from the most mobile people incentivizes them to leave. This capital flight has already begun in response to the proposal, proving such policies ultimately reduce the state's long-term tax revenue by driving away the very people they aim to tax.

The proposed wealth tax applies to illiquid assets. A founder of a highly-valued private AI startup could be deemed a 'billionaire' and face a massive tax bill on paper wealth, even if their company never exits or ultimately sells for a much lower price, creating a huge financial risk.