California's Wealth Tax Triggers $1 Trillion Exodus—Middle Class Gets the Bill

California’s contagion spreads north. Washington’s proposed 9.9% millionaire tax is already spooking NBA investors trying to bring back the Sonics. The threshold is per household—two Amazon software engineers at $500K each get hit. Pass-through businesses report on personal returns, meaning this “millionaires tax” hammers local small businesses while multinationals skate.

Governor Newsom breaks with his party’s progressive base, warning the wealth tax will cause an exodus. He’s citing history: 12 European countries had wealth taxes in 1990, only 3 remain. France lost 42,000 millionaires and €35 billion in assets. NBER data: when entrepreneurs leave, tax payments drop 51%—the exact opposite of what the tax was supposed to achieve.

The Atlantic reveals the “safeguards” are a trap: the state takes your money first, then you spend years and hundreds of thousands in legal fees fighting to get it back. A unicorn founder at $5B valuation owes $100M while having zero ability to sell shares. UC Berkeley law professor Brian Galle’s response: founders explaining liquidity constraints are just “greedy liars.”

Bay Area startups raised $154 billion in 2025—more than the next 9 top startup regions combined. OpenAI and Anthropic alone accounted for 30% of all venture investment nationwide in Q4. This is the golden goose Sacramento is threatening to slaughter. SF Bay startups succeed at 2.5x the rate of startups anywhere else in the world.

The wealth tax targets self-made founders while inherited wealth skates free. The buy/borrow/die strategy lets heirs borrow against appreciated assets, never sell, and pass everything tax-free with stepped-up basis. Heritage Foundation data: 9 of 10 top billionaires are self-made. But fixing inherited wealth loopholes? Progressives won’t support that.

SaaStr founder Jason Lemkin says the quiet part out loud: leave after Series B, go distributed. Founders who aren’t yet billionaires are getting the message—one just canceled a second California factory, sending hundreds of manufacturing jobs to another state. The next Apple, Google, and Nvidia won’t be built here.

The math gets starker: California’s top 10% pay 76% of all state taxes. The CA Wealth Exodus tracker now shows 47 billionaires gone, taking $882 billion and an estimated $13.2 billion in annual revenue. The departures read like a tech hall of fame: Larry Page ($274.7B), Sergey Brin ($253.4B), Peter Thiel ($29.4B).

David Friedberg’s private poll shows 80-90% of affected billionaires have already left or will leave. Pirate Wires surveyed 21 billionaires—roughly 10% of California’s total—and every single one is planning to exit. The fiscal damage: $2-2.5 trillion in assets fleeing, representing $20 billion in lost annual revenue.

The kill switch hidden in the ballot language: a November amendment treats voting control as ownership. A founder with 10% equity but 10x voting shares gets taxed as if they own 100%. For Larry Page and Sergey Brin, this means being assessed on $1.2 trillion each—creating $60 billion annual tax bills they literally cannot pay without selling control of their companies.

Six days after Mahan’s warning, Chamath reports $1 trillion has fled—half of all billionaire wealth in California. The symbolism is brutal: Sergey Brin terminated or moved 15 California LLCs in the 10 days before Christmas. Both Google founders—the men who put Silicon Valley on the map—are reducing their California footprint.

San Jose Mayor Matt Mahan goes on CNBC with the warning Sacramento refuses to hear: billionaires will flee a 5% asset seizure, and the tax burden lands on everyone else. California’s top 1% pay 46% of state taxes. Reports already show Peter Thiel and Larry Page weighing exit options—and the ballot measure’s retroactive clause means even those who left could be on the hook.