Crypto Billionaires Threaten California Exit Over Wealth Tax: Bluff or Reality?
Date Published
California lost over 700,000 residents in 2023 alone, many citing high taxes and living costs as key factors. Now, a new proposal for a 5% wealth tax on billionaires has intensified the debate, especially within the crypto sector. This measure aims to raise $100 billion to offset federal health care cuts.
The Proposed tax Explained
The 2026 Billionaire Wealth tax Act would impose a one-time 5% levy on assets exceeding $1 billion for California residents as of January 1, 2026. Payments spread over five years, but critics argue it could become recurring if successful.
According to the Wall Street Journal, this tax targets ultrawealthy individuals, including those in centralized finance (CeFi) who hold vast crypto assets. Proponents see it as essential to fund public services amid budget shortfalls.
#Impact on Crypto Wealth
Crypto billionaires, enriched by CeFi platforms and volatile markets, face significant hits from this asset-based tax. Unlike income taxes, it assesses unrealized gains, potentially forcing sales in a regulated environment.
Chamath Palihapitiya stated on X that individuals with a collective $500 billion net worth "scrambled and left California" before year-end to avoid the levy. This highlights how regulation could accelerate capital flight.
Bill Ackman, a hedge fund manager, called the proposal an "expropriation of private property," per Fox Business reports. He warns it undermines investor confidence in CeFi ecosystems.
Historical Context of Exodus Threats
Past wealth tax proposals in California have prompted similar warnings, yet many billionaires stayed due to business ties. A Forbes analysis questions if relocations truly occur or serve as negotiation tactics.
In 2025, tech leaders like Peter Thiel and Larry Page reportedly prepared to leave, as noted by Fortune. Their moves tie into broader CeFi regulation concerns, where state policies influence national trends.
#Crypto-Specific Reactions
Crypto executives argue the tax harms innovation in regulated CeFi spaces, per Yahoo Finance. It could deter investments in California-based exchanges and wallets.
Amjad Masad, CEO of Replit, posted that liquid billionaires are exiting while others might evade through exempt assets like real estate. This could dismantle Silicon Valley's startup scene, including CeFi ventures.
Is It a Bluff? Analyzing the Data
Studies show mixed outcomes; some billionaires relocate to tax-friendly states like Texas and Florida. A Sacramento Bee report suggests backers remain unconcerned, betting on minimal actual departures.
Rep. Ro Khanna mocked the threats, saying he would "miss them very much," according to Jonathan Turley's blog. Yet, real exits could deepen California's deficits.
#Potential legal Challenges
The proposal's retroactive elements raise constitutional issues, as highlighted in CNBC coverage. Courts might strike it down, offering relief to CeFi players.
Experts like attorney Alex Spiro, in a letter to Gov. Newsom via Financial Express, argued it violates property rights and could face fraud probes.
Jonathan Turley tweeted that shrinking the tax base through such measures ignores bloated budgets, urging fiscal restraint over new regulations.
Broader Implications for CeFi regulation
This tax intersects with federal crypto rules, potentially pushing CeFi firms offshore. Analysts predict it could stifle growth in regulated markets.
Union-backed, the measure aims to protect health care, but opponents see it as punitive regulation on wealth creators.
In the end, this debate underscores how state-level taxes shape CeFi landscapes and investor behavior. Monitoring voter approval in 2026 will reveal if threats materialize into a full exodus.
