Chamath Palihapitiya Warns California Wealth Tax Could Crush Startup Founders: 'It Will Kill Entrepreneurship In California'

Venture capitalist Chamath Palihapitiya is raising alarms over a proposed California wealth tax, saying it could unintentionally force young startup founders into financial ruin.

Palihapitiya Highlights Risk To Startup Founders' Cash Flow

On Saturday, Palihapitiya criticized the tax while sharing a post from Rep. Ro Khanna (D-Calif.).

"It's not 1% a year for 5 years. It's a one time 5% tax on all assets and it will kill entrepreneurship in California," he wrote.

He illustrated a scenario where a founder taking a $150,000 salary with $1.2 billion in paper equity would owe $60 million in cash under the proposed tax.

Wealth Tax Could Bankrupt Founders

Palihapitiya added, "Now imagine that after the tax is assessed, in early 2027, the company takes a write down to $200M. Now his share is $40M. But he still owes $60M… Should he declare bankruptcy now because he tried to start a business but was retarded enough to do it in California?"

Ro Khanna responded, questioning whether Chamath truly believed a 1% annual wealth tax for five years would destroy Silicon Valley or if his concern was broader.

Khanna emphasized that extreme wealth holders "must do more for society given the backlash and angst people feel."

It's not 1% a year for 5 years.

It's a one time 5% tax on all assets and it will kill entrepreneurship in California.

Here is an example:

John Doe starts a company. He takes a nominal salary – say $150k for this example – and the rest in equity in the company. Let's say he… https://t.co/zdq1bqovXX

— Chamath Palihapitiya (@chamath) December 28, 2025

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Ackman Warns Billionaires May Flee California Over Wealth Tax

Hedge fund billionaire Bill Ackman warned that California's economy was at risk as some of the state's richest residents considered leaving over a proposed billionaire tax.

He criticized state leaders for policies that push out entrepreneurs, saying California was "on a path to self-destruction" and could lose key business leaders.

The warnings followed reports that billionaires, including tech investor Peter Thiel and Google co-founder Larry Page, were considering reducing or ending their California ties.

Thiel explored opening an office elsewhere and spending more time outside the state, while Page discussed leaving entirely, with companies linked to him filing incorporation documents in Florida.

Earlier this month, Gov. Gavin Newsom (D-Calif.) accused President Donald Trump of favoring billionaires with economic policies that left working Americans financially vulnerable.

Trump and his allies rejected the claims, citing GDP growth, falling inflation, record stock markets, and gains in retirement accounts benefiting working families.

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