Crypto Titans Clash with California Over Proposed 5% Billionaire Wealth Tax
Silicon Valley's new money is drawing a line in the digital sand. A brewing political storm pits cryptocurrency's wealthiest architects against California lawmakers pushing a radical fiscal proposal.
The Battle Over Digital Gold
At the heart of the conflict is a simple, contentious idea: a 5% annual levy on the net worth of the state's billionaires. For founders whose fortunes are tied to volatile blockchain networks and token holdings, the tax represents an existential threat—a direct claim on paper wealth that can evaporate in a single market tweet.
Opposition isn't just about the money; it's a referendum on value itself. Crypto leaders argue their assets represent a new form of capital—global, decentralized, and inherently borderless. Taxing it like real estate or stock portfolios, they claim, misunderstands the fundamental technology. It's the old world trying to regulate a system designed to bypass its gates.
A Provocative Standoff
The pushback has been swift and public. Expect legal challenges, lobbying blitzes, and not-so-veiled threats of relocation to friendlier jurisdictions. For an industry built on circumventing traditional financial intermediaries, a direct wealth grab by the state is the ultimate adversarial test.
The outcome could set a precedent, signaling whether digital wealth remains in the jurisdictional gray area or gets fully absorbed into the old tax code. One thing's certain: when you build a fortune on disrupting the system, you'd better be ready when the system comes to collect its share—usually with a hefty administrative fee, of course.
Billionaires seriously consider leaving California
According to a report by the New York Times, many billionaires including Peter Thiel and Larry Page are exploring ways to reduce or cut ties to California due to the proposed measures. Thiel, who also backs the digital asset exchange Bullish, is considering relocating and investing in other states.
Page, Google’s Co-Founder and a longtime Palo Alto resident, has filed documents to incorporate three limited liability companies in Florida and is reportedly contemplating leaving California by the end of the year.
The potential tax WOULD retroactively apply to anyone residing in California as of January 1, 2026. Billionaires with $20 billion in assets could face a one-time $1 billion tax, payable over five years.
For Page, with an estimated net worth of $258 billion, the tax could exceed $12 billion, for Thiel, with $27.5 billion, the bill could be more than 1.2 billion.
Crypto executives warn of capital flight
Senior figures in the crypto industry have also strongly opposed the measure. crypto exchange Kraken’s Co-Founder Jesse Powell and Bitwise’s CEO Hunter Horsley argue that taxing unrealized gains would force billionaires to sell assets or equity in their businesses, potentially disrupting companies and accelerating relocation out of California.
I say this with no joy as a California resident:
Many who’ve made this state great are quietly discussing leaving or have decided to leave in the next 12 months.
More generally, one of the fascinating developments of this decade is people voting their views not with the… https://t.co/bTlBnsYdnY
Powell warned on X that the proposal could be “the final straw,” saying billionaires would take jobs, philanthropy, and investment with them.
Castle Island Ventures partner Nic Carter echoed similar concerns, questioning whether policymakers had fully analyzed capital mobility in an era when wealth can MOVE across borders quickly.
Critics compare the proposal to wealth tax experiments in Europe. Dune CEO Fredrik Haga pointed to Norway’s experience, where a similar tax reportedly led many wealthy individuals to move abroad, generating less revenue than expected.
Defenders say investment in services fuels innovation
The proposal has been publicly defended by California Democrat Representative Ro Khanna, a Democrat with a crypto-friendly policy.
My district is $18 trillion, nearly 1/3 of US stock market in a 50 mile radius. We have 5 companies with a market cap over a trillion dollar companies. If I can stand up for a billionaire tax, this is not a hard position for 434 other members or 100 Senators.
Those saying that… https://t.co/k7j4TvJARK
He asserts that investment in childcare, housing, healthcare, and education eventually enhances innovation through maintaining a stable workforce and decreasing inequality over time.
Yet skepticism remains over whether new tax revenue would be effectively used. Horsley and NYU Professor Austin Campbell cited a December audit by the California State Auditor that flagged issues with how taxpayer funds were managed, including untracked or weakly justified spending.
Broader U.S. debate on crypto and taxes
The California proposal is a contrast to the recent developments in other states. Arizona has proposed pro-blockchain bills that would exempt digital assets in the state of Arizona and safeguard blockchain node operators.
The lawmakers of Ohio and Wyoming have also introduced exemptions of small crypto transactions as an incentive to adopt and innovate.
With states adopting various approaches, the billionaire tax in California brings to the fore an increasing conflict between investment in the services of the state and business-friendly environment.
As the voters are likely to resolve the question in 2026, the discussion will influence more extensive debates about wealth, taxation, and the future of innovation in the U.S.
Also Read: Japan FY2026 Tax Reform: Crypto Reclassified as Financial Product
