A proposed billionaire tax in California has stirred up a storm in Silicon Valley, prompting tech giants to threaten leaving the state, while Democratic Governor Gavin Newsom is attempting to veto the tax proposal—fearing it could trigger a massive exodus of wealth.

As a global tech hub, California boasts more billionaires than any other U.S. state, with some estimates suggesting the number runs into the hundreds. The state's nearly $350 billion budget relies heavily on personal income tax revenue, with nearly half of it coming from the top 1% of earners.

A major healthcare union in California is pushing a proposal set for a voter ballot this November. The initiative calls for a one-time 7.5% tax on billionaire assets, covering stocks, artwork, business equity, collectibles, and intellectual property. The funds raised would backfill federal healthcare funding cuts for low-income groups resulting from legislation signed by former President Donald Trump last year.

In a state marked by stark wealth inequality, this tax plan has ignited fierce competition among various interests. The timing is particularly sensitive ahead of the midterm elections, as both Democrats and Republicans grapple with public economic anxiety over rising prices.

An online debate has already left tech leaders worried about Silicon Valley's potential decline, with millions of dollars flowing into political committees involved in the fight. PayPal co-founder and billionaire Peter Thiel donated $3 million to a committee linked to an anti-tax business group.

However, it remains uncertain whether the proposal will make it to the ballot—qualification requires gathering over 870,000 voter signatures.

Despite affecting only a tiny fraction of California's approximately 39 million residents, the tax would draw from an enormous pool of wealth. It would apply retroactively to billionaires who were residents of California on or before January 1 of this year.

At least 25 individuals on Forbes' 2025 list of the world's 500 richest people either reside in California or have significant ties to the state. Determining whether they are full-time residents or frequent visitors could spark disputes, as many own properties in other locations.

Aaron Levie, CEO of the publicly-traded Silicon Valley company Box, stated, "Implementing this policy is like playing with fire." He fears the proposed tax could force entrepreneurs to relocate their companies and startups to other regions.

Although not a billionaire himself, Levie added that even liberal-leaning tech pioneers, "while they might agree with the proposal's intent, would find it utterly absurd from a purely economic and structural standpoint."

Governor Newsom has long opposed state-level wealth taxes, arguing they undermine the competitive edge of the world's fourth-largest economy. With California's finances strained and Newsom himself considering a 2028 presidential run, he is trying to block the proposal before it reaches the ballot.

Analysts warn that a billionaire exodus could cost California hundreds of millions in tax revenue.

Jack Pitney, a political scientist at Claremont McKenna College, noted, "This is also why Newsom's path to the Democratic presidential nomination won't be smooth. He's already facing a fiscal deficit of an unclear scale... and this billionaire tax could seriously backfire in the coming years."

The proposal has created a deep rift between Newsom and the progressive wing of his own party, including Vermont Senator Bernie Sanders, who publicly supports the initiative and suggests it should serve as a model for other states.

In a post on social media platform X, Bernie Sanders wrote, "Our nation cannot thrive when a tiny few possess vast wealth while the vast majority struggle to get by."

Another supporter, Democratic Congressman Ro Khanna—a potential rival to Newsom in the 2028 presidential race—mocked billionaires threatening to leave California over a tax aimed at providing healthcare for low-income groups.

The Service Employees International Union (SEIU), the main force behind the proposal, dismisses the threat of a billionaire exodus as fearmongering.

In a statement, Suzanne Jimenez, Director of the SEIU's Western Office, called the tax a "practical solution to the crisis created by Congress." She added that it would "ensure emergency rooms stay open, hospitals are staffed, and the healthcare system remains functional."

Meanwhile, the California Business Roundtable is leading the opposition against the proposal. The group claims the tax would "harm the state's economy, devastate the budget, drive investment out of California, and ultimately increase costs for working families."

Even before this wealth tax proposal emerged, a growing number of people had been leaving California due to its high cost of living and stringent regulatory environment.

The world's richest person, Elon Musk, with a fortune of $724 billion, purchased property in Texas years ago and relocated the headquarters of his electric vehicle company Tesla to Austin.

The financial threat posed by this proposed tax is clearly pushing more prominent Silicon Valley tech pioneers to reduce their asset exposure in California and distance themselves from the state's liberal policies—including Google co-founders Larry Page and Sergey Brin, who moved to California for graduate studies at Stanford University in the mid-1990s and settled there.

Although Page and Brin stepped down from management roles years ago, they remain the largest shareholders of Alphabet, Google's parent company, with their combined $530 billion wealth largely tied to their holdings.

Multiple reports indicate that both have begun shifting more of their assets to Florida. Google, which has been based in Mountain View for 25 years, has not commented on their recent asset transfers.