Some of Silicon Valley’s richest residents are warning they may leave California if a proposed one-time wealth tax on billionaires becomes law. The backlash has come to a point that celebrity lawyer Alex Spiro wrote directly to Governor Gavin Newsom, explaining the proposal is unconstitutional and economically dangerous. The proposed tax is still at an early stage, but it could appear on the November 2026 state-wide ballot if it gathers enough signatures.
What is the proposed wealth tax?
The proposal is backed by the Service Employees International Union–United Healthcare Workers West. It would impose a one-time 5% tax on the total assets of California residents whose net worth exceeds $1 billion. The tax would apply to all assets, including company shares, private businesses, venture capital holdings, and real estate, even if those assets are illiquid and do not generate cash income.
If passed, the tax would apply retroactively to anyone who was a California resident on January 1, 2026, even if they later move out of the state. This means simply that billionaire worth $20 billion would owe $1 billion, payment would be spread over five years
Why are billionaires protesting?
Several high-profile tech figures say the tax would force founders to sell parts of their companies just to raise cash, and could push entrepreneurs and investors to leave California permanently. Palmer Luckey, cofounder of defense tech startup Anduril, said the tax would force founders to sell “huge chunks” of their companies to pay for what he called wasteful political spending.
Billionaire investor Bill Ackman warned that California is “on a path to self-destruction,” on X saying entrepreneurs would leave with their jobs and tax revenues. According to a New York Times report, tech leaders including Peter Thiel and Google co-founder Larry Page are also weighing whether to cut ties with the state if the measure advances.
The letter to Gavin Newsom
Opposition to the tax was formally laid out in a December 11 letter written by Alex Spiro, a prominent lawyer representing wealthy California residents who would be affected. The letter, obtained by Business Insider, requests Newsom to stop the initiative from moving forward and warns of legal challenges and economic fallout.
Below are key excerpts from the letter, quoted directly, “The Act has serious legal problems and would cause significant economic damage to California and the broader economy.”
Claim 1: The tax is unconstitutional
In the letter, the lawyers claims that that the proposal is not a tax in substance, but a confiscation of property, especially because it applies to illiquid assets, “Although the Act purports to be a tax, it is in reality an uncompensated confiscation of property,” the letter reads.
“The Act imposes a 5% levy on total accumulated wealth, including illiquid assets that generate no income. That is in substance a taking without just compensation.”
He cites Supreme Court precedent to argue that the government cannot force a small group to shoulder a public burden alone. “The Act concentrates an extraordinary burden on a small group to solve a general revenue problem—exactly what the Constitution prohibits,” the letter reads.
Claim 2: Retroactive taxation is unfair
Spiro also objects to the proposal’s retroactive nature, which could tax people who leave California before the law is even passed. It reads, “For the people who relocate from California in 2026 before the November election, the Act would tax them after they have become citizens of other States and without any ability to vote on the measure.”
“A 5% levy on total net worth imposed on former residents who departed before the law was even enacted clearly meets the definition of ‘harsh and oppressive.’”
Claim 3: The law is unprecedented and legally vulnerable
The letter stresses that California has never attempted a tax like this, making it more likely to be struck down in court. It also added, “California has never imposed a wealth tax, much less one that reaches former residents and that is targeted at a small group of citizens. There can be no doubt that the current Supreme Court would carefully evaluate a law so out of step with the American legal tradition.”
Claim 4: Capital and innovation will leave California
From an economic standpoint, Spiro warns the state would trade a short-term gain for long-term losses. The letter adds, “It will trigger an exodus of capital and innovation from California. By passing this proposal California would exchange a one-time windfall for the permanent loss of billions in annual income taxes, capital gains taxes, property taxes, and economic activity.” He also warns that paying the tax would require forced asset sales, “Paying a 5% wealth tax would require massive forced liquidations, depressing asset values and triggering market instability.”
What happens next?
Newsom has said he opposes the tax and would “fight” it. However, if the proposal passes as a ballot initiative, he cannot veto it. Spiro makes clear that legal action is inevitable if the measure advances, “Our clients are prepared to mount a vigorous constitutional challenge if this measure advances. They will not remain if subjected to an unconstitutional confiscation of their wealth.”
