California’s proposed wealth tax has been the subject of intense debate for some time after lawmakers pushed through a 5% tax on the ultra-wealthy. The move has already led to an exodus of several billionaires and top businessmen from the Golden State.
While the proposal seeks to tax wealth tied up in tax-free assets such as stock options, family trusts and luxury items, it has drawn sharp criticism from entrepreneurs and venture capitalists in Silicon Valley. Critics warned that the move could further accelerate the shift of high-profile tech executives and investors to lower-tax states like Texas and Florida.
Among those who have already fled the country are, among others, the head of Facebook Mark Zuckerberg, the founder of Oracle Larry Ellison, Larry Page from Google or the head of PayPal Peter Thiel. The latest household name is legendary “ET” 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 pursue a controversial wealth tax. At the same time, some chose to stay, saying that Silicon Valley remains the world’s largest center for technology, investors and skilled workers.
What is the “billionaire tax”? About all that
Under a tax proposal that could go before voters this November, every Californian with a net worth of more than $1 billion would have to pay a one-time, 5 percent tax on their wealth, with the proceeds going to the state’s education, food assistance and health care programs.
The “billionaire tax” is actively promoted by the Service Employees International Union-United Healthcare Workers West. If approved, the tax would apply retroactively to residents from January 1, giving billionaires five years to pay the amount, the Guardian reported.
Proponents argue it will raise tens of billions of dollars to cover state health care deficits, noting that it targets wealth that often goes untaxed.
“Ultra-wealthy people often avoid income taxes by minimizing taxable income and instead rely on assets such as yachts and rare coin collections. There is an ongoing debate about how best to ensure fair 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 country, to help fund the state budget. Critics of the tax proposal, including venture capitalist Chamath Palihapitiya, warn that the move could actually worsen rather than solve the state’s budget deficit.