California's Proposed 5% ‘Unrealized Gains’ Wealth Tax Draws Concern from Crypto and Tech Billionaires

California's proposed 2026 Billionaire Tax Act is raising alarms among prominent names in the crypto and tech industries. This ballot initiative plans to implement a one-time 5% tax on net wealth exceeding $1 billion, including unrealized gains on paper assets, in order to support state services. Critics claim this measure might lead to high-net-worth individuals leaving the state, adversely affecting local investment and innovation while forcing the sale of equity to meet tax obligations.

Key Takeaways

A proposed 5% wealth tax in California targets assets over $1 billion, including unrealized gains.
Industry leaders warn the tax could lead to an exodus of wealthy individuals, harming California's economy.
Proponents argue the tax addresses state budget shortfalls and wealth inequality.
The measure requires nearly 875,000 signatures to qualify for the November 2026 ballot.

California Billionaire Tax

Growing Concerns Over Capital Mobility and Exodus

The Billionaire Tax initiative, endorsed by the Service Employees International Union-United Healthcare Workers West, aims to tax wealthy Californians' net worth, channeling funds into healthcare and public services. Since the tax includes unrealized gains—meaning value increases on assets that haven't been sold—critics believe it could force affluent individuals to sell stocks or parts of their businesses just to pay the tax, even when they haven't actually received any cash.

Notable figures in the crypto and tech spaces have voiced their concerns. Jesse Powell, co-founder of Kraken, expressed on X that this tax could be "the final straw," warning that billionaires may choose to move their spending, philanthropy, jobs, and resources out of California if the proposal goes through. Additionally, Hunter Horsley, CEO of Bitwise, shared similar worries about how taxing unrealized gains might destabilize the financial framework for private holdings and startup equity.

A Broader Political and Economic Discussion

To be placed on the November 2026 ballot, the initiative needs to collect about 875,000 signatures. Proponents argue that it offers a solution to the ongoing state budget issues, especially in healthcare, by taxing substantial wealth that often goes untaxed as most billionaires do not realize gains through selling their assets. They assert that the growth in wealth is significantly outpacing wage growth and that taxing this wealth is a matter of fairness.

Opposition to the proposal extends beyond the private sector. Some analysts caution that this tax could weaken California's competitive edge, accelerate the movement of capital to jurisdictions with friendlier tax policies, and ultimately reduce long-term tax revenues as wealthy individuals and businesses relocate to escape the burden.