Twenty-one billionaires spoke about the looming prospect of a wealth tax in California, whether they will leave the state and what impact it would have on the tech industry.
We’re a little over a month into an industry-wide conversation about the future of tech in California, which is largely taking place off social media. At this point, most people know the conversation was triggered by a ballot proposition floated by the state’s largest health care union that seeks to legalize a first-of-its-kind asset seizure targeting (for now) billionaires.
Over the last week, I spoke with 21 billionaires about the looming prospect of a wealth tax. We discussed whether they left or are planning to leave California (most of them are), what a wealth tax means for the technology industry, and finally how, if at all, they plan to fight back.
The men I spoke with include founders of companies working on a diverse range of technologies, including artificial intelligence, defense, cryptography, security, biotechnology, finance, and general software development, as well as prominent venture capitalists at several of the most famous firms in the world.
In total, these men are responsible for something like 50,000 employees, running companies in California worth a combined $1.3 trillion.
Proposal written to fail
Among the men I interviewed impacted by the ballot proposition, none were willing to speak on the record.
“I think there’s definitely a sense that you’ll be attacked and singled out and the average nerd is conflict-avoidant,” one man said.
The ballot proposition was constructed in such a way that it can technically not solve any of the stated problems it was ostensibly written to address — chief among them, filling a massive budget hole in Medi-Cal (the state’s Medicaid program) following California legislation that guaranteed permanent funding for illegal immigrant health care.
That promise was never tenable, but following federal Medicaid cuts, it has dragged California into crisis.
The futility of the ballot proposition has left most men impacted with a sense that the ballot proposition’s true purpose is to humiliate them, disrupt their personal lives, and hurt their companies.
Given especially the proposition’s dangerous language surrounding “control,” founders of private companies in particular, with their armies of lawyers investigating this thing, believe the proposition, as written, could actually bankrupt them.
Obviously, there is now real danger in appearing successful in the state of California, as the far left, imbued with a great deal of power, and benefiting now from several years of wealth scapegoating throughout the mainstream press, attempts to liquidate its perceived enemies in business.
But first, are these guys staying and fighting, or are they leaving? And how many have already left?
Three men I spoke with in the largest billionaire Signal chat said they ran an informal poll, and 70% of the chat (around 60 people, not all of whom were billionaires) indicated they would leave the state if the ballot proposition passes. According to that same poll, around 15% have already left the state.
‘Not just billionaires’
I’ve spoken with around 10% of billionaires in the state myself. Of the 21 men I interviewed, 20 would have been impacted by the ballot measure. All 20 of them, including the Democrats, as well as several of the most committed diehard proponents of revitalizing San Francisco, are now developing an exit plan. (Three have already left.)
Almost all of them have either purchased property out of state or are in the process of buying property out of state now; almost all of them have engaged lawyers to help them navigate what they see as a potentially years-long legal battle; and, among the men I spoke with who are presently running companies, almost all have deployed business ops leaders to focus on opening offices outside of California.
While, without exception, every founder of a private company I interviewed mentioned the ballot proposition’s confusing and confounding “control” language, their focus is generally directed to the overall uncertainty surrounding legislation in the state.
Concern has much less to do with this single ballot proposition than the question of how companies will be targeted in the future, and everyone believes they will be targeted again.
There is also nobody who believes the introduction of architecture for a legalized asset seizure, something we’ve never before seen in this country, will conclude with an exclusive targeting of billionaires over the years to come.
Once the concept is normalized, everyone assumes wealth taxes of this kind will ultimately target every “wealthy” person in the state, with the term “wealthy” redefined in whatever manner leftists find useful from election cycle to election cycle.
“I think 100% of people who are looking at this understand it is being marketed as a one-time thing, but it will not be one time, and it will not only target billionaires. Once the structure is put in place, it is going to expand,” one impacted businessman explained.
Tech ready to bail
I expected people to be upset. I expected maybe half of the men I spoke with to be working on a plan to leave the state. I did not expect every man I spoke with to be considering an exit, and I was actually shocked to find this applied even to the men most historically outspoken about the unique importance of California.
“The crazy thing,” one of the California maximalists said, “is that I’m thinking about leaving, because I am one of the happiest to pay taxes people I know.”
This is not a man who is allergic to what I would personally term draconian forms of taxation, or even to a “properly done wealth tax” in general, he explained (though he was the only person I spoke with who was open to one).
He believes this form of taxation is inevitable, as artificial intelligence will ultimately replace all human labor, at which point an income tax will not be practical. In this, he most preferred some kind of national land tax.
In other words, the terrain in California is still, in one corner, wealthy, thoughtful business leaders trying to understand the world, and in the other, union thugs who actually understand power.
But targeting the engine of the tech industry, with language that seemed to disproportionately threaten founders of earlier-stage private companies, was much too far — even for the “happiest to pay taxes” guy in tech.
This is where virulently left-wing policy wonks seem to not understand the technology industry. While the academics responsible for this ballot proposition seem to believe they’re over the target, so to speak, and billionaires crying about the destruction of tech are just attempting to scare them from securing their fair share of someone else’s money, even the most thoughtful entrepreneur is simply looking at the letter of the proposal and concluding it may be literally impossible for them to stay in California.
“If this tax actually passes,” said one prominent venture capitalist, “I think the technology industry kind of has to leave the state. Because every person running a company will have to look at the math, and they will think, ‘Well obviously that cannot happen because it will literally destroy the company.’
“The cap table will transfer to state coffers or, I don’t know, weird secondary sales.
“The whole basic fundamental model of building a company that does something important and compounds over five, 10 years just doesn’t work anymore. And that’s the thing that could really kill the network effect.”
‘An awakening’
One executive working with hundreds of new companies a year, who is now actively working on launching a new office in either Austin or Cambridge, speculated that startups might continue to be founded in California for the time being, “but the second it actually works, the CEO will move and open other offices elsewhere, and most of your workers will be someplace else.”
To the question of whether the asset seizure would ultimately pass, opinions were diverse, but nobody seemed to care. That wasn’t what mattered.
That this could happen at all is what mattered.
“It’s an awakening for a lot of people,” said one of the most impacted, well-known, and beloved founders I spoke with.
And it seems to be an awakening for Democrats specifically.
“If it does or doesn’t pass, this is the single most radicalizing red pilling thing to ever happen to push them into the arms of the Republican Party, and I think it makes clear, more than anything else that happens, that it’s not about helping the poor but impoverishing the rich, and the pain is part of the point. That’s a new realization for a lot of people.”
Another billionaire said it seemed, from conversations he’d been having with other men impacted by the ballot proposition, that it would harm the Democratic Party:
“The vast majority of people affected by this are Democrats, including many of the biggest donors to the party,” he said.
He characterized this as a catalyzing event among Democratic donors, many of whom he was now privately engaging with, “unlike any other issue I’ve seen.” Yes, he said, there was a big “leopards-eating-faces element to this.”
But actual asset seizure was truly not something any of them expected.
‘Idiots finally’ watching
There was only one man I interviewed willing to speak on the record. Joe Lonsdale had long since, and quite famously, left California by November. We had a fun conversation.
“So, I’m ecstatic because these idiots are finally waking up,” he said. “I don’t know why they’re quite so politically retarded, but this is the nature of people. Until you come to their house and threaten them with violence, they just ignore what’s happening … now they are finally realizing we have to fight to win, and it’s going to take hundreds of millions of dollars a year.
“I’m fighting to save the country, but these people are realizing they have to fight for their state, and how many levels they are behind in that game. There’s basically a default over a billion dollars a year that goes into the far left in California via unions.”
Joe’s sense, which I share, is there are three political camps in California including the far left, the “moderate” left, and the center right. The far left is by far the most organized. This leaves an alliance between the “moderate” left and the center right over the issue of permanently stopping a wealth tax targeting unrealized assets and the founders of private companies as the only way to secure a place for tech in the state.
While an alliance like this would have been difficult to imagine even before President Trump’s second term, which has ushered in a new age of political polarization, billionaires from the center left and center right are at least privately signaling openness to cooperation. This is not only because of a California wealth tax.
Rather, the looming threat of a wealth tax has catalyzed a much wider-ranging conversation among these men on the many challenges facing the state.
“What happens as America splits?” one man asked. “You have this exodus of capital and businesses from one set of states to another set of states … the states left behind largely have state pension plans. In California, the pension obligation accounting is done in such a way as they are allowed to obscure the real liability. When this is properly calculated, there is somewhere between a $600 billion and $1 trillion shortfall on pensions.
“What happens when a state can’t pay its bills? We federalize the debt. This is where the union breaks. This is where America enters civil war. Because if you are living in Texas or Tennessee, you are living within your means, now taxes have to be raised to bail out a trillion dollars of pension liabilities in California. The whole thing breaks.”
‘Written by Communists’
One man I spoke to thought of his life a year from now, after having moved his office. He imagined having new friends. His kids would be happily re-enrolled in school on the other side of the country. The ballot proposition would no longer matter to him, nor would the whims of a random angry mob. That would be nice, he thought. It would be nice to never think about this or any other ballot proposition again.
“It was written by Communists who actually believe that the concentration of wealth is society’s greatest evil,” he said, “and who are hoping they can remove wealth from everyone who has it.”
This was not about a law. This was about a terrifying class of people rapidly amassing power in this country.
“I’ve been telling the kids that,” he said. “We can’t go back to California because of Communists.”
This abridged excerpt run with permission from Pirate Wires.
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