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California didn’t become the fifth largest economy in the world by accident. Silicon Valley was not built by regulators. Hollywood did not become a global storytelling powerhouse because of government planning. California was built by entrepreneurs, risk-takers, and innovators who believed in capitalism and the simple American ideals that if you work hard, take risks and build something worthwhile, you should be rewarded.
That’s why California’s newly proposed billionaire tax should scare anyone who still believes capitalism works. This proposal is not just another tax increase. It is a fundamental shift away from this system that makes Americans thrive as a nation.
Under the plan, California would levy a one-time tax on residents with net worth above $1 billion, targeting “wealth” rather than income. That includes unrealized gains meaning stock ownership, private equity and illiquid assets that exist on paper. Wealth does not always reside in checking accounts. Proponents call it fairness, but it is a tax on success before success is seen.
Here is the part that many politicians ignore. Billionaires don’t sit on piles of cash. Their wealth is mostly tied up in businesses, real estate companies and their private companies. When the government wants a big check based on the balance of the paper, the only way to pay it is to sell the property.
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Elon Musk announced the launch of his third “America Party” with X on Saturday. (Francis Chung/Politico/Bloomberg via Getty Images)
This is where the real damage begins for the people who depend on these billionaires to give them jobs to become millionaires.
If you force someone to sell public stock, the markets can get it. But when you force a private company stock sale, you often force the founder to sell part or all of their business earlier than planned. That could mean selling to private equity, taking power, cutting costs or laying off workers to raise money.
In other words, a tax aimed at the “rich” is not just about hitting balance sheets. Hits payroll.
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Capitalism works because it encourages innovation and growth. It rewards people for building companies, hiring employees and reinvesting profits. When you start taxing wealth just because it exists instead of income, profit or transaction, you turn that incentive structure upside down. The message becomes clear to businessmen. If you build too much and become too successful, the government will punish you and perhaps prematurely dismantle what you have built.
We have already seen how this movie ends for some Californians.
Take billionaire entrepreneur Elon Musk, who moved Tesla’s headquarters from California to Texas. Musk didn’t go because he didn’t like sunshine or beaches. He left because excessive regulations, rising taxes and growing hostility towards business innovation made it difficult to build and grow companies. When the world’s most influential entrepreneur and job creator votes with his feet, policymakers should listen.
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He was not alone. Host Joe Rogan moved his podcast empire from Los Angeles, citing taxes, governance and quality of life concerns. Larry Ellison moved Oracle’s headquarters to California. Just look at Sergey Brin and Larry Page and their recent moves to cut ties with California. Even liberal Hollywood executives are quietly establishing residences in Nevada, Texas or Florida, while maintaining second homes in Malibu.
This is not a coincidence. It is cause and effect.
If you force someone to sell public stock, the markets can get it. But when you force a private company stock sale, you often force the founder to sell part or all of their business earlier than planned.
Entrepreneurs don’t just create wealth for themselves. They create jobs, chains, tax revenue and philanthropy. When government policies force founders to sell companies early just to pay wealth taxes, it’s workers who pay the price long before billionaires do.
The danger doesn’t stop at California’s borders. Other green states are watching carefully. If California can tax unearned wealth, what’s to stop New York, Illinois or Massachusetts from doing the same? Today, he is a billionaire. Tomorrow, its founders are worth $100 million. Next, it’s the family business owners who spent decades building companies to be taxed on paper values that didn’t make money.
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Supporters argue that the tax will only affect a few hundred people. That misses the point. Policies are not judged by how many people hit them. They are judged by their motives.
Capitalism rests on the promise that if you take risks, build something meaningful and create value for others, you can be rewarded with a pot of gold at the end of the rainbow.
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California once understood that better than anywhere else in the world. This billion tax suggests that the state is forgetting what made it the real Golden State. Since COVID-19, you’ve seen a huge shift in individuals and businesses, indicating that the Golden State may not be so golden after all.
The lesson is simple. Money is always chasing something. When success is taken for granted, money flows. And when capitalism undermines itself, everyone pays the price, not just the billionaires.
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