Crypto Industry Backlash to California Billionaire Tax

A proposed 5% tax on billionaires’ wealth in California has drawn a strong response from crypto executives, who argue it would trigger an exodus of entrepreneurs and capital flight, and would be wasted anyway.

The ballot initiative, known as the 2026 Billionaire Tax Act, proposes a 5% tax on net wealth above $1 billion to help fund the health care system and state assistance programs, to the SEIU United Healthcare Workers West union.

As the proposed wealth tax is partly assessed against unrealized gains, some billionaires may need to sell stock or parts of their businesses to raise funds to pay the tax, which would either be payable in one installment, or over five years with interest payments.

Senior figures in the crypto industry, including Bitwise CEO Hunter Horsley and Kraken co-founder Jesse Powell, that the measure would only result in billionaires leaving the state, with a negative overall effect.

“I promise you this will be the final straw. Billionaires will take with them all of their spending, hobbies, philanthropy and jobs. Solve the waste/fraud issue,” Powell in an X post on Sunday.

Related:

One of the key defenders of the proposals is US Representative Ro Khanna, a crypto-friendly Democrat from California’s 17th Congressional District. He has for the tax in a series of X posts, arguing that it will fund better childcare, housing, and education, which, in turn, will be good for American innovation.

Tax measure could result in capital flight

Castle Island Ventures founding partner Nic Carter and ProCap BTC chief investment officer Jeff Park also that the tax would prompt billionaires to move all their capital out of the state.

“I generally like Ro and have interacted with some of staff who have always been fantastic, but I do wonder — have they done an analysis of capital mobility in response to wealth taxes?” Carter on Sunday.

“It seems to me that capital is more mobile than ever, and one time wealth taxes are a signal to capital — like a sovereign default — that more can be expected in the future,” he added.

Wealth taxes don’t always work

Fredrik Haga, the co-founder and CEO of on-chain data platform Dune, argued that Norway had tried a similar tax and that it resulted in a mass exodus of the wealthy from the Nordic country, and raised less money than expected.

“Friendly reminder to California: Taxes on unrealized capital gains have led to more than half of the wealth held by Norway’s top 400 taxpayers moving abroad,” Haga said.

“Norway has become more equal and made everybody poorer and worse off, just as expected from strong socialist ideas.”

Money might not reach intended targets

Austin Campbell, a New York University professor and of Zero Knowledge Consulting, and Bitwise founder Horsley both to a December audit from the California State Auditor, which issues with how taxpayer funds have been spent, including unaccounted-for or poorly justified expenditures.

“But what Ro has a plan for is not pulling the fire alarm and fixing this. Rather what he’s been spending time on is a new private citizen asset confiscation to have more money for the government. Politicians have long forgotten their role is to be a servant,” Horsley said.