California Billionaire Wealth Tax Sparks Backlash From Crypto and Tech Leaders

California’s proposed 2026 Billionaire Tax Act has drawn sharp criticism from crypto and tech leaders. The 5% levy on net wealth exceeding $1 billion includes unrealized gains, raising concerns that it could force founders and investors to sell assets or relocate. The tax aims to fund public services, but critics say it misunderstands how modern wealth is created in sectors like startups and crypto according to the report.

The proposed tax is seen as a potential threat to the innovation economy. Many tech and crypto leaders argue that it could weaken the startup ecosystem by pressuring founders to liquidate illiquid assets or take on debt to pay the tax. Chamath Palihapitiya, a venture capitalist and former CEO of Palantir, has warned that the tax could damage entrepreneurship according to recent analysis.

The tax structure is a point of contention. Unlike traditional taxes, the one-time 5% levy applies to unrealized gains, including private company equity and long-term crypto holdings. This has led to concerns that founders could owe millions of dollars based on paper wealth according to experts.

Why Did This Happen?

The proposal is backed by the Service Employees International Union–United Healthcare Workers West (SEIU UHW), a major labor group. The union argues that the tax will help address funding shortfalls in healthcare and social programs according to labor leaders. It is estimated that the tax could raise up to $100 billion from roughly 200 billionaires based on financial projections.

Industry leaders, however, argue that the tax creates uncertainty for entrepreneurs. Many startup founders take modest salaries and rely on equity for long-term value. A sudden tax liability on unrealized gains could force them to make difficult choices according to industry analysis. This uncertainty could discourage long-term risk-taking and innovation, especially in emerging sectors like blockchain and crypto as research shows.