A proposed wealth tax targeting California’s richest residents is drawing sharp criticism from prominent figures in the crypto industry, who argue the measure would drive entrepreneurs out of the state while failing to deliver the revenue lawmakers expect.
The ballot initiative, known as the 2026 Billionaire Tax Act, would impose a 5% annual tax on net wealth above $1 billion. Backed by the SEIU United Healthcare Workers West union, the proposal aims to fund healthcare services and state assistance programs and is being prepared for placement on the November 2026 general election ballot.
Unlike traditional income taxes, the measure would apply partly to unrealized gains.
Industry figures warn of capital flight
Crypto executives were quick to push back. Bitwise CEO Hunter Horsley, Kraken co-founder Jesse Powell, and Castle Island Ventures founding partner Nic Carter all warned that the tax would accelerate an exit of high-net-worth individuals from California.
“I promise you this will be the final straw,” Powell wrote on X, arguing that billionaires would take their spending, philanthropy, and job creation elsewhere rather than absorb a recurring wealth levy.
Carter questioned whether supporters of the measure had adequately considered how mobile capital has become. He likened one-time wealth taxes to a warning signal, suggesting they create expectations of future levies and encourage investors to relocate preemptively.
ProCap BTC chief investment officer Jeff Park echoed that view, pointing to the ease with which capital and residency can now be shifted across jurisdictions.
Supporters frame the tax as pro-innovation
Not all voices in the debate oppose the proposal. Representative Ro Khanna, a Democrat representing California’s 17th Congressional District and a vocal supporter of the crypto industry, has defended the tax publicly.
He argues that the revenue could strengthen childcare, housing, and education, laying a foundation for long-term economic growth and innovation.
Critics question whether revenue would reach its targets
Opponents of the proposal have also raised concerns about whether new tax revenue would be used effectively. Dune co-founder and CEO Fredrik Haga pointed to Norway’s experience with wealth taxes, arguing that similar policies produced unintended consequences.
“Taxes on unrealized capital gains led to more than half of the wealth held by Norway’s top 400 taxpayers moving abroad,” Haga said.
He added that the outcome was greater economic equality paired with weaker overall prosperity.
Skepticism over spending efficiency has further fueled opposition. Austin Campbell, a New York University professor and founder of Zero Knowledge Consulting, and Bitwise CEO Hunter Horsley both referenced a December audit from the California State Auditor that flagged problems with how public funds have been handled, including expenditures that were poorly documented or lacked clear justification.
Horsley argued that policymakers are focusing on raising new revenue rather than addressing existing inefficiencies.
“What’s missing is a serious effort to fix the waste that’s already there,” he said.
“Instead, the focus has shifted to expanding the government’s reach into private assets.”
Skeptics also point to international precedents.
Dune co-founder and CEO Fredrik Haga cited Norway’s experience with wealth taxes, arguing that similar policies triggered an outflow of wealthy residents while generating less revenue than projected.
That example has become a common reference point among critics who view wealth taxes as economically inefficient and difficult to enforce in a globalized financial system.
A high-stakes test for California
If the Billionaire Tax Act advances to the ballot, it is likely to become a flashpoint in California’s broader debate over taxation, competitiveness, and capital mobility. For the crypto industry, the proposal underscores a familiar tension: whether innovation thrives best under redistribution-focused policies or lighter tax regimes that prioritize capital retention.
The outcome may shape not only state revenues, but where the next generation of tech founders chooses to build.
Oleksii Shumak
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