California Representative Ro Khanna isn't backing down from his support of a billionaire tax, even as some of the state's wealthiest residents make noises about packing their bags. The debate has become a fascinating test case for how much the ultra-rich actually care about marginal tax rates versus, you know, living in nice weather near Stanford.
The Tax That Started the Fight
Here's what we're talking about: California is considering taxing residents whose net worth exceeds $1 billion at up to 5% of their assets. If you've got at least $20 billion sitting around as of January 1, 2026, you'd face a one-time $1 billion tax. The proposed 1% tax on billionaires would specifically fund healthcare amid federal Medicaid cuts.
Khanna took to X to make his case, pointing out that within a 50-mile radius, his district alone accounts for nearly one-third of the U.S. stock market, with five companies boasting market caps over $1 trillion. That's not nothing.
His argument? Silicon Valley didn't become Silicon Valley because of low taxes. It became Silicon Valley because of talent, infrastructure, and capital. "Those saying that we wouldn't have a future NVIDIA in the Bay if this tax goes into effect are glossing over Silicon Valley history," Khanna wrote.
He drove the point home by referencing Nvidia Corp. (NVDA) founder Jensen Huang. "Jensen wasn't thinking I won't start this company because I may have to one day pay a 1 percent tax on his billions," Khanna stated. Huang launched the chipmaker in Silicon Valley because of semiconductor talent, proximity to Stanford University, and access to venture capital—not tax optimization.
Billionaires Making Threats
Khanna's defense came in response to reporting by journalist Teddy Schleifer, who noted that billionaire venture capitalist Peter Thiel had threatened to leave California if the 1% billionaire tax were implemented. Thiel, co-founder of Palantir Technologies (PLTR), isn't alone in his concerns, but he's certainly one of the most vocal.
The proposed tax has sparked serious debate among California's wealthiest residents, creating visible tension between the ultra-rich and their political representatives. Some view these exit threats as legitimate economic concerns. Others see them as theatrical posturing.
The Bigger Picture on Wealth Taxes
California's wealthiest residents have faced ongoing scrutiny over their tax contributions. A study found that the effective tax rate for America's richest 0.0002% dropped from 30% to 24% following the 2017 GOP tax overhaul. That's fueled arguments that the current system disproportionately favors the ultra-wealthy.
Supporters of the billionaire tax see it as a correction mechanism—a way to ensure that the state's richest residents contribute a fairer share to the communities that helped create their wealth.
But critics warn of unintended consequences. Billionaire investor Bill Ackman and others argue that aggressive tax policies could drive entrepreneurs and major employers out of the state entirely, threatening job creation and long-term economic growth. These concerns have intensified broader worries about California's economic trajectory.
Khanna's endorsement of the billionaire tax aligns with his previous positions on wealth distribution. He's been consistent in arguing that those who've benefited most from the region's infrastructure and talent pool should contribute proportionally to maintaining it.
The fundamental question remains: Will billionaires actually leave over a 1% tax, or is this just bargaining theater? Time will tell whether Silicon Valley's allure proves stronger than its tax burden.