A Bitter Pill in California's Billionaire Tax: The Fine Print is Fueling Silicon Valley Exodus
California's proposed billionaire tax, intended to address income inequality and fund social programs, has sparked intense debate among tech giants. While the 5% rate may seem reasonable, it's what lies beneath the surface that's sending shockwaves through Silicon Valley - the fine print.
The law treats voting shares as if they were actual ownership, taxing founders on control they hold rather than wealth they possess. This effectively punishes innovators for maintaining control of their companies and discourages them from launching startups where they have a majority say. The issue affects every tech founder who retained control through dual-class stock.
For instance, Google co-founders Larry Page and Sergey Brin would be hit hard under the proposed tax. Although they hold only 3% of Google's shares, they control about 30% of its voting power. Under this law, they'd owe on the 30%, rather than the smaller percentage of their actual ownership.
The problem isn't just theoretical; it's a harsh reality that's deterring young entrepreneurs from starting businesses in California. Bay Area venture capital firm Hanover's founding partner Joe Malchow warns that the proposed tax would be devastating for founders poised to solve some of California's biggest problems, like energy shortages.
"This is not just about billionaires leaving," says Walczak. "This is about innovators being incentivized to leave, and that has significant consequences." The proposed tax will hit startup founders with phantom wealth, making it difficult for them to retain control of their companies.
Even notable figures on both sides of the aisle are speaking out against this ill-defined tax law. Nvidia founder Jensen Huang claims he'd be "perfectly fine" if enacted, but left-wing figures like Governor Gavin Newsom vow to stop it. This suggests that even those who support progressive policies recognize the harm the proposed tax could inflict.
As one can envision, a mix of control and taxation is proving too potent for Silicon Valley's power players. They're taking heed, leaving an estimated $1 trillion behind since January 1, as some prominent founders like Larry Page and Sergey Brin have already flown the coop. The proposed billionaire tax may be seen as a well-intentioned gesture to alleviate income inequality but its unintended consequences threaten the very fabric of innovation in California - and it's a lesson that should not be taken lightly.
California's proposed billionaire tax, intended to address income inequality and fund social programs, has sparked intense debate among tech giants. While the 5% rate may seem reasonable, it's what lies beneath the surface that's sending shockwaves through Silicon Valley - the fine print.
The law treats voting shares as if they were actual ownership, taxing founders on control they hold rather than wealth they possess. This effectively punishes innovators for maintaining control of their companies and discourages them from launching startups where they have a majority say. The issue affects every tech founder who retained control through dual-class stock.
For instance, Google co-founders Larry Page and Sergey Brin would be hit hard under the proposed tax. Although they hold only 3% of Google's shares, they control about 30% of its voting power. Under this law, they'd owe on the 30%, rather than the smaller percentage of their actual ownership.
The problem isn't just theoretical; it's a harsh reality that's deterring young entrepreneurs from starting businesses in California. Bay Area venture capital firm Hanover's founding partner Joe Malchow warns that the proposed tax would be devastating for founders poised to solve some of California's biggest problems, like energy shortages.
"This is not just about billionaires leaving," says Walczak. "This is about innovators being incentivized to leave, and that has significant consequences." The proposed tax will hit startup founders with phantom wealth, making it difficult for them to retain control of their companies.
Even notable figures on both sides of the aisle are speaking out against this ill-defined tax law. Nvidia founder Jensen Huang claims he'd be "perfectly fine" if enacted, but left-wing figures like Governor Gavin Newsom vow to stop it. This suggests that even those who support progressive policies recognize the harm the proposed tax could inflict.
As one can envision, a mix of control and taxation is proving too potent for Silicon Valley's power players. They're taking heed, leaving an estimated $1 trillion behind since January 1, as some prominent founders like Larry Page and Sergey Brin have already flown the coop. The proposed billionaire tax may be seen as a well-intentioned gesture to alleviate income inequality but its unintended consequences threaten the very fabric of innovation in California - and it's a lesson that should not be taken lightly.
. They're already struggling to make ends meet, and now they gotta worry about losing control of their companies? It's like, what's the point of even starting something if you can't even keep it under your own roof 
? And it's not just the founders who are gonna be hurt – all the people who rely on them for jobs and innovation are gonna feel the pinch too 
. I think this whole thing is a perfect example of how well-intentioned policies can go awry when you don't do your due diligence 
.
!! they're literally taxing people on control, not actual wealth! 
how r u supposed to run ur own startup w/ phantom wealth? 
larry page & sergey brin are like "peace out" already & its just the beginning 
$1 trillion is a crazy amount 2 lose... hope they rethink this law ASAP 
Maybe the 5% rate is too low and those billionaires should be paying more? I dunno, maybe they should just give some of that money to charity 
That would be a shame... or is it? Maybe we need to think outside the box and come up with something new that doesn't harm the very people who can drive change 
this is so messed up lol - they're taxing founders on control, not actual wealth? that makes no sense 
this law is literally discouraging young entrepreneurs from starting businesses in california because they won't want to give up control 
. They're treating voting shares as actual ownership, which is just plain wrong. Like, who needs that much complexity in their tax code? It's creating phantom wealth and discouraging innovators from starting up in Cali. I mean, Google co-founders would be hit hard under this law - 30% control of the voting power but only 3% actual ownership 
. We need to simplify tax laws and make them more fair for everyone, not just create more headaches for founders 
. It's estimated that $1 trillion is leaving Cali since January 1... that's some serious talent losing out 
. Maybe it's time to rethink this tax law and focus on creating a more inclusive environment for startups to thrive? 
ugh, another example of gov't making things more complicated than they need to be 
. I get that they want to address income inequality, but can't they just simplify the tax code for once? 
. and now we've got $1 trillion leaving the state since Jan 1st 
. that's like losing an entire economy