Venture capitalist Chamath Palihapitiya just demolished the case for California’s billionaire tax.
While much of the focus has been on the existing class of individuals who would be subject to the tax, Palihapitiya reminded CNBC viewers that the real target is the young founder with a company valued at $1 billion, who may be drawing a meager salary as they pour resources back into growing their business. And yet they will suddenly be on the hook for a $50 million check to the California government.
The ultra-wealthy at the top may have the means to avoid paying the tax, but up-and-coming entrepreneurs will be stuck between a rock and a hard place, as the new tax cripples Silicon Valley and what’s left of the state’s next generation of innovators. As Palihapitiya put it, the tax is simply “a way of opening the door to go after other people.”
"There are going to be companies that will say enough is enough," says @chamath of California's billionaire tax act proposal. https://t.co/jOJJxG5ynK pic.twitter.com/OXjjdlgKnm
— Squawk Box (@SquawkCNBC) July 14, 2026
"It doesn't matter what that number is, and I'll tell you why," Palihapitiya said. "The real thing that is going to happen from here is every single kid that goes and starts a YC (Y Combinator) company is not going to do it in California. They're going to leave. Then there are going to be companies like Paramount who are just saying, you know what, enough's enough. Because again, this is not a billionaire. That's a very optimistic founder if they think they're going to get to a billion dollars."
"This is not a, not really. I mean, these valuations happen all the time. The problem with the way that this thing is written is some kid who actually has a little bit of success and is able to raise at a huge up round still has no money, all of a sudden is going to be given a $50 million bill," Palihapitiya continued. "He may be only making $100,000 a year. This is why this law is so dumb. It's just a way of opening the door to go after other people."
"So the billionaires will be able to sue," he added. "There's going to be issues of standing. There's going to be issues of tax. This will take 15 years to meander through the courts at the state and the federal level. So the state of California will accomplish nothing."
This comes as California voters are set to decide this November whether to impose a wealth tax on individuals with a net worth exceeding $1 billion, placing the measure directly before the electorate.
Gov. Gavin Newsom, despite his progressive credentials, has come out against the proposal. But after years of moving California Democrats further to the left, there is only so much he can do to restrain the movement he helped cultivate. Some have viewed his opposition as an attempt to position himself for a 2028 presidential campaign, though distancing himself from the proposal will not erase how poorly he has run California.
Recent polling puts support for the billionaire tax in the low-to-mid 40 percent range. Whether that holds through Election Day remains to be seen.
A new poll shows voters overwhelmingly support California’s proposal to tax billionaire wealth to fund health care — by nearly a 2-to-1 margin.
— Bernie Sanders (@BernieSanders) March 10, 2026
The American people are sick and tired of massive income and wealth inequality.
Billionaires need to start paying their fair share.