The Real Reason Tech Billionaires Are Leaving California

Silicon Valley's biggest names are scrambling to move their money out of California, but the threat that's really driving them away has little to do with the headline tax rate. Instead, it's about how the state would actually calculate what billionaires owe—a distinction that could cost founders billions and force them to sell off pieces of their companies.

The proposed wealth tax has sparked an exodus of some of tech's most recognizable figures, including Google co-founder Larry Page and Oracle founder Larry Ellison. But interviews with founders and investors reveal the real panic centers on a technical detail buried in the proposal: the state would tax founders on their voting shares rather than the actual equity they control.

Background

California's billionaire exodus has been building for years. High taxes, strict regulations, and rising costs of living pushed tech leaders like Elon Musk to relocate to Texas years ago. But the proposed wealth tax has accelerated the departures dramatically.

Two separate tax proposals are now circulating. The first would impose an annual one to 1.5 percent tax on anything over $50 million. The second, the 2026 Billionaire Tax Act, would levy a one-time 5 percent tax on assets valued above $1 billion. If approved by voters in November and applied retroactively to anyone living in California on January 1, 2026, a person with $20 billion in assets would owe $1 billion, payable over five years.

Governor Gavin Newsom has already opposed the measure, calling it problematic while warning against panic. Yet the proposals have pushed even longtime California residents to reconsider their ties to the state. Google co-founders Larry Page and Sergey Brin, who arrived in California during the mid-1990s for graduate studies at Stanford, have begun moving assets to Florida. Public filings show Page's family office and research fund no longer list California addresses.

Key Details

How the Tax Actually Works

The mechanics of the wealth tax create the real problem for founders. Under the proposal, the state would not simply calculate what a person owns and tax that amount. Instead, it would tax the total value of a founder's company holdings based on their voting shares, regardless of how much liquid cash they actually have available.

Consider a founder worth $100 billion whose wealth is almost entirely tied up in their company. If only $2 million exists in liquid assets—money actually available in the bank—the founder would still owe taxes on the full $100 billion valuation. For someone subject to the 5 percent one-time tax, that means owing $5 billion to California, even if they do not have that cash on hand.

"You could be a founder, you could be a tech star, and you could be worth a hundred billion dollars. But say you only have like $2 million in liquid assets because all that money is used to run your new AI company. Well, doesn't matter. You're going to be taxed entirely on that $100 billion," according to tech entrepreneur Allison Huynh, a startup founder and former fundraiser for presidents Barack Obama and Joe Biden.

This distinction matters enormously. Founders cannot simply write a check to pay the tax. They would need to sell company shares—potentially losing voting control of the businesses they built. For someone running an artificial intelligence company or robotics startup, forced share sales could mean losing control of their own company to pay a state tax bill.

Who Would Be Affected

Palmer Luckey, co-founder of defense tech startup Anduril, laid out the problem bluntly. He said the tax would force founders to sell huge chunks of their companies to pay for what he called fraud and waste. Peter Thiel, co-founder of Palantir and worth approximately $27.5 billion, could owe more than $1.2 billion if the measure becomes law. Billionaire investor Bill Ackman called California "on a path to self-destruction" if the measure moves forward.

The exodus is already underway. Multiple founders and investors have sold California homes in recent weeks and begun house hunting in Florida, Texas, and Puerto Rico. These are not just billionaires but the investors and entrepreneurs who back new companies in artificial intelligence, robotics, and healthcare—the sectors driving California's economy.

What This Means

Analysts warn that an exodus of billionaires could cost California hundreds of millions in tax dollars. The state relies heavily on wealthy residents for revenue. About half of California's personal income tax revenue comes from the top 1 percent of earners in a state budget approaching $350 billion.

If major tech founders and investors leave, they take more than just their personal wealth. Companies like SpaceX and Oracle have already relocated operations to other states, bringing thousands of jobs with them. A mass departure of founders could trigger a broader shift in where innovation and capital concentrate in America.

Huynh compared the situation to a failing restaurant raising prices instead of lowering them. "Instead of lowering the price, they increase the price. And then you go into the restaurant, and it's like $50 for a bowl of really bad dumplings," she said.

The fundamental issue is that the tax proposal does not account for how founder wealth actually works. Most billionaire wealth sits in company shares, not cash. Taxing that wealth without a corresponding ability to pay forces a choice: sell the company or leave the state. For founders who built their companies from nothing, both options feel impossible.