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Saying it’s a “billionaire tax” is misleading, and the fine print on Proposition 40 makes that clear.
Prop 40 would tax the net worth of the approximately 200 billionaires in California at a rate of 5 percent, and would only be collected one time. Ro Khanna, a Congressman from California, has been a strong advocate for this measure. The executive board of the California Democratic Party supported this measure. The backers of Proposition 40 are banking on approximately $2 trillion in billionaire net worth sitting still and liquid enough to cut nine-figure checks to Sacramento — all to backfill federal healthcare cuts they claim are coming.
The architects of this proposition understand the donations will not occur.
Mark Cuban, former surrogate for Kamala Harris and a non-conservative billionaire, went on a tirade against Rep. Khanna last week. Over 2 million people viewed Cuban’s thread where he called the wealth tax a “massive F U” to the entrepreneurship community. Cuban argued that most founders of companies valued at more than a billion dollars are cash poor — their wealth exists on paper, locked in illiquid private shares. An asset tax based on a valuation they cannot convert to cash forces them to either leave California or hand the state an equity stake in their company. Cuban said he would now make “not being in California” a prerequisite for any future startup investment he makes.
This is not a conservative threatening to boycott. This is a former Democratic donor informing the party that their policies will decimate the innovation economy.
Khanna’s proposed solution to the cash-poor founder problem is to let them take a non-recourse government loan — paid back with an equity stake. Unless you have some experience with government equity deals, you understand just how dangerous that proposal is. California would become a forced equity partner in private businesses.
Worse: Khanna has already conceded the threshold will go beyond $1 billion. In a July Substack essay, he explicitly supported the Ultra-Millionaire Tax Act proposed by Elizabeth Warren — a 2% annual federal levy on every fortune exceeding $50 million. That’s not a one-time payment. That’s a permanent annual haircut, every year, forever. And because the threshold is a flat statutory number that hasn’t been adjusted for inflation since 2019, real-terms creep has already begun. When the Act was first introduced, it covered the top 0.05% of households. Today’s math puts it at 0.15%. Five more years of inflation and the bracket keeps expanding — with no new act of Congress required.
Mike Solana of Pirate Wires stated it plainly: “This ends with your 401k.”
He’s correct. Every European country that tried a wealth tax on “the rich” either repealed it — France, Sweden, Germany, Austria, Denmark — because it proved unproductive and chased capital out, or it survived by steadily targeting the middle class. Norway began with a wealth tax on the wealthy. Now they tax moderate fortunes. The Netherlands taxes deemed returns on assets above roughly €57,000. The ratchet of wealth taxes only moves one direction.
California cannot afford the experiment. The state already carries the highest income tax rate in the nation, a $68 billion structural deficit, and a business climate that has been bleeding companies and wealthy residents to Texas, Florida, and Nevada for over a decade. Prop 40 is premised on those billionaires sitting still and paying. Cuban just publicly announced he will not.
The architects of “eat the rich” do not believe this will actually work. They are running a class warfare campaign and a political ploy — not a credible plan to fund the state. And when the billionaires leave, so does the revenue. Then the threshold drops. It always does.
