Crypto billionaires are threatening to leave the state of California after a major trade union proposed a 5% wealth tax on residents worth more than $1 billion.
Service Employees International Union-United Healthcare Workers West had proposed the new tax in November 2025. The trade union had suggested the new tax would generate up to $100 billion from state residents, more than the federal funding cut to California’s state health care program. The measure would need 850,000 signatures before it could be placed on the ballot for a popular vote in the 2026 elections in November.
Prominent California-based investors and billionaires, such as PayPal co-founder Peter Thiel and Google co-founder Larry Page, have already threatened to leave. Others have argued that the exit of billionaires could eliminate important sources of tax revenue for the state.
However, The threat of a flight of the rich due to taxes is not a new phenomenon, and past experience suggests that the threat of a flight of the crypto rich may be a hoax.
Crypto Billionaires Are “Quietly Discussing” Whether to Leave
The union filed its proposal on November 26. In addition to the 5% tax, it would also impose a $1 billion lump sum tax on state residents worth more than $20 billion. A tax on wealth, rather than on income, would constitute a tax on unrealized profits.
Prominent members of the crypto industry, as well as the tech and venture capital sectors present in California, are now up in arms.
Jesse Powell, co-founder and chairman of cryptocurrency exchange Kraken, called the measure a “steal”, adding that the tax “would be the last straw. Billionaires would take all their spending, hobbies, philanthropy and jobs with them.”
“Many of the people who make this state great are quietly discussing or have decided to leave in the next 12 months,” said Hunter Horsley, CEO of Bitwise. He said billionaires would likely follow the growing trend of “people voting their ideas instead of the ballot box” and relocate to other jurisdictions.
Former Facebook executive and leading venture capital investor Chamath Palihapitiya claimed that people with a collective wealth of $500 billion have already fled the state. “They took no risks because of the proposed asset forfeiture tax – which was billed as a ‘billionaires tax’.”
He noted a common argument among opponents of the tax, namely, that while the tax might be a boon to state coffers in the short term, “California’s budget deficit will only get bigger.”
Horsley said, “When the billionaires leave, revenues also decrease. If revenues decrease, the state will need to either: (a) Reduce its spending/programs/benefits (b) Raise taxes on those who stay, with no increase in benefits.”
Conservative think tanks such as the Cato Institute have argued in the past that top earners pay a disproportionate share of income taxes.
According to Nick Carter, partner at Castle Island Ventures, the crypto industry may find it particularly easy to navigate the headwinds of the new taxes. He said capital is now “more mobile than ever” and “distributed or globalized startups are now completely common, even at scale.”
What do the rich really do after the new tax?
In 2024, the Tax Justice Network, a British advocacy group, published a working paper on the topic. It found that after property tax reforms were implemented in Norway, Sweden and Denmark, less than 0.01% of wealthy households moved.
The UK saw the second-largest net outflow of millionaires in 2024, with more than 9,000 people leaving the country. But Mark Bou Mansour, head of communications for the Tax Justice Network, said that was less than 1% of the approximately 3 million millionaires living in the country at the time.
“There has been no millionaire migration. If you look at their published migration numbers from 2013, the millionaire migration rate globally and nationally has been consistently below 1% since then. So, taken at face value their data actually shows that millionaires are highly stable,” he said.
Another 2024 paper from the London School of Economics found that the ultra-wealthy were strongly tied to place and found no more respondents in the 1% tax bracket who would leave the UK.
Such examples assume the rich were moving to another country, but even in the case of California, where the crypto-rich would only risk moving to another state, the data still does not support the risk of money flight.
Inequality.org, an advocacy organization concerned with wealth distribution in the US, stated that “Although some tax migration is inevitable, the wealthy who move to avoid taxes represent a small percentage of their own social class.”
Citing data from the Institute for Policy Studies and the State Revenue Alliance, Inequality.org said top earners don’t move up because of family, social networks and local business knowledge.
Despite tax increases in Washington State and Massachusetts, the number of individuals with at least seven-figure net worth continued to increase. Furthermore, each state was able to raise enough revenue to fund state programs.
It appears that funding state programs is the least of the concerns of some of California’s ultra-wealthy. Powell said existing taxes are being wasted due to wasteful spending and fraud.
David Sachs, the White House crypto and AI czar and a crypto billionaire in his own right, said, “Why does California need a wealth tax? To finance massive fraud. Red states like Texas and Florida don’t even have an income tax. Democrats steal everything, then blame job creators for their ‘greed’.”
Allegations of fraud in states with Democratic governors, such as California and Minnesota, have recently come before the Trump administration dispatched the Federal Bureau of Investigation and federal police agencies like Immigration and Customs Enforcement. In the case of Minnesota, local officials have denied the unverified allegations.
The California tax proposal still hasn’t even been on the ballot, let alone been voted on and approved by the governor. California may lose some of its crypto-rich, but the gain in revenue may be worth it.
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