Crypto Executives Slam Proposed California Tax, Warn It Could Lead To Wealth Exodus

Heavyweights in the crypto and tech sectors are sounding the alarm over a proposed California tax act, warning it could lead to a wealth exodus and capital flight.

The act, the 2026 Billionaire Tax Act, is backed by Service Employees International Union-United Healthcare Workers West and proposes a 5% tax on net wealth above $1 billion. The goal of the tax is to help fund the health care system and state assistance programs.  

Snippet of the proposed tax act (Source: OAG)

Crypto Industry Executives Warn The Tax Will Do More Harm Than Good

One of the key defenders of the proposal is crypto-friendly US Representative Ro Khanna. In a series of X posts, he made the case for the tax, and said that it will help fund better childcare, housing, and education. This in turn, he argued, would be good for American innovation. 

Several crypto industry executives have pushed back against the proposed tax act. One of the main areas of contention for the proposal is that the tax will also be applied to paper gains that have not yet been realized. Critics argue that the tax on unrealized gains would force equity and asset sales to cover the costs. 

Among the crypto and tech leaders that have responded strongly to the proposed tax act is Kraken co-founder Jesse Powell. He said in a Dec. 28 X post that this tax, if implemented, “will be the final straw.” 

“Billionaires will take with them all of their spending, hobbies, philanthropy and jobs,” Powell warned. 

Bitwise CEO Hunter Horsley echoed those warnings. “Many who’ve made this state great are quietly discussing leaving or have decided to leave in the next 12 months,” he said.  

Wealth Taxes Aren’t Always Effective

Dune co-founder and CEO Fredrik Haga argued that taxes on the wealthy don’t always work, noting that Norway had tried a similar tax. This resulted in a mass exodus of the wealthy from the Nordic country, the Dune CEO said. It also raised less money than what was expected. 

“Friendly reminder to California: Taxes on unrealized capital gains have led to more than half of the wealth held by Norway’s top 400 taxpayers moving abroad,” Haga said.

“Norway has become more equal and made everybody poorer and worse off, just as expected from strong socialist ideas.” 

Questions Arise About How The Money Would Actually Be Spent

In addition to the warnings of a wealth exodus and capital flight, questions have also emerged as to whether the money will reach its intended targets. 

A New York university professor and founder of the Zero Knowledge Consulting firm, Austin Campbell, pointed to a December audit from the California State Auditor. The audit highlighted issues with how taxpayer funds have been spent, including unaccounted-for or poorly justified expenditures. 

Pro-crypto lawyer John Deaton pointed to the audit as well, and said that Khanna should focus on the recently reported $70 billion in fraud first before going after the wealthy with the proposed tax.