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California didn’t become the world’s fifth-largest economy by accident. Silicon Valley wasn’t built by regulators. Hollywood didn’t turn into a global storytelling powerhouse because of government planning. California was built by entrepreneurs, risk-takers, and innovators who believed in capitalism and the simple American ideology that if you work hard, take risks and build something valuable, you should be rewarded.
That’s why California’s newly proposed billionaire tax should alarm anyone who still believes capitalism works. This proposal isn’t just another tax hike. It’s a fundamental shift away from the very system that makes Americans prosperous as a nation.
Under the plan, California would impose a one-time tax on residents with net worths over $1 billion, targeting “wealth” rather than income. That includes unrealized gains which means stock ownership, private company equity and illiquid assets that exist on paper. Wealth isn’t always in checking accounts. Supporters call it fairness, but it’s a tax on success before success is ever realized.
Here’s the part most politicians ignore. Billionaires don’t necessarily sit on piles of cash. Their wealth is overwhelmingly tied up in businesses, real estate stock holdings and their private companies. When the government demands a massive check based on paper valuations, the only way to pay it is to sell assets.
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Elon Musk announced the launch of his third “America Party” via X on Saturday. (Francis Chung/Politico/Bloomberg via Getty Images)
And that’s where the real damage begins for the people who rely on these billionaires to provide jobs for them to become millionaires.
If you force someone to sell public stock, the markets can absorb it. But when you force the sale of private company stock, you’re often forcing a founder to sell part of their business or all of it earlier than planned. That can mean selling to private equity, taking on leverage, cutting costs or laying off workers to generate liquidity.
In other words, a tax aimed at “the rich” doesn’t just hit balance sheets. It hits payrolls.
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Capitalism works because it incentivizes innovation and growth. It rewards people for building companies, hiring workers and reinvesting profits. When you start taxing wealth simply for existing rather than income, profits or transactions, you flip that incentive structure upside down. The message becomes clear to entrepreneurs. If you build too much and succeed too much, the government will punish you and possibly dismantle prematurely what you built.
We’ve already seen how this movie ends for other Californians.
Take billionaire entrepreneur Elon Musk, who moved Tesla’s headquarters from California to Texas. Musk didn’t leave because he dislikes sunshine or beaches. He left because regulatory overreach, rising taxes and a growing hostility toward business innovation made it harder to build and scale companies. When the world’s most influential entrepreneur and job creator votes with his feet, policymakers should listen.
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He wasn’t alone. Host Joe Rogan moved his podcast empire out of Los Angeles, citing taxes, governance and quality-of-life concerns. Larry Ellison relocated Oracle’s headquarters out of California. Just look at Sergey Brin and Larry Page and their recent moves to sever ties with California. Even liberal Hollywood elites quietly establish residency in Nevada, Texas or Florida, while keeping second homes in Malibu.
This isn’t coincidence. It’s cause and effect.
If you force someone to sell public stock, the markets can absorb it. But when you force the sale of private company stock, you’re often forcing a founder to sell part of their business or all of it earlier than planned.
Entrepreneurs don’t just create wealth for themselves. They create jobs, supply chains, tax revenue and philanthropy. When government policies force founders to sell companies prematurely just to pay a wealth tax, it’s workers who pay the price long before billionaires do.
The danger doesn’t stop at California’s borders. Other blue states are watching closely. If California can tax unrealized wealth, what’s stopping New York, Illinois or Massachusetts from doing the same? Today, it’s billionaires. Tomorrow, its founders worth $100 million. Next, it’s family business owners who spent decades building companies only to be taxed on paper valuations they haven’t monetized.
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Supporters argue the tax would only affect a few hundred people. That misses the point. Policies aren’t judged by how many people they hit. They are judged by the incentives they create.
Capitalism depends on a promise that if you take risks, build something meaningful and create value for others, you can be rewarded with the pot of gold at the end of the rainbow.
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California once understood that better than almost anywhere else in the world. This billionaire tax suggests the state is forgetting what made it a real Golden State. Since COVID-19, you’ve seen a massive shift of both individuals and businesses, showing that the Golden State may not be so golden anymore.
The lesson is simple. Money always chases something. When success is treated like a liability, money leaves. And when capitalism is undermined, everyone pays the price and not just the billionaires.
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