California Billionaire Tax Could Drive Entrepreneurs Away, Executive Warns

A proposed wealth tax in California could prompt a mass departure of the state's most successful business leaders, according to Eric Schiffer, chairman of family office Patriarch and CEO of Reputation Management Consultants. Schiffer warned of a "giant sucking sound" as entrepreneurs leave the state if Proposition 40, which would impose a one-time tax on billionaires, is approved by voters.

Proposition 40, scheduled for the Nov. 3 ballot, seeks to levy a 5% tax on the net worth of billionaires who were California residents as of January 1, 2026. Payments would be due in 2027, with options for spreading them over five years at an additional cost. The measure generally excludes real estate, pensions, and retirement accounts from the taxable assets.

Schiffer, who works with numerous billionaire clients, stated that many are dissatisfied with the proposal. "Why would anyone stay if they have spent their life building wealth that they were already taxed on?" he questioned, expressing concern that successful individuals would feel attacked and unappreciated, leading them to declare "No mas, I'm out. Goodbye."

The potential consequences of the tax extend beyond the wealthy, Schiffer argued, suggesting that a relocation of businesses and entrepreneurs could result in fewer opportunities for all Californians, impacting jobs, investment, and tax revenue.

The California Democratic Party has endorsed the measure, while Governor Gavin Newsom has expressed opposition. Republican gubernatorial candidate Steve Hilton has also voiced concerns about the tax's potential strain on the state's economy.

The state's nonpartisan Legislative Analyst's Office acknowledged that some billionaires might leave California in response to the tax, potentially reducing state income tax revenue by less than $1 billion annually. However, the office estimates the wealth tax itself would temporarily generate tens of billions of dollars over several years.

Schiffer further suggested that the tax could eventually be expanded to target individuals with lower net worths, raising concerns about a broader shift in the state's fiscal policy.

Mark Cuban, another billionaire, has previously pointed out that many founders are "cash poor, stock rich," meaning their wealth is largely tied up in company shares rather than liquid assets readily available to pay a wealth tax. Schiffer echoed this sentiment, noting that a significant portion of billionaire wealth can be held in stock, including in private companies.

U.S. Representative Ro Khanna, a proponent of the wealth tax, has argued that the levy could help fund essential services like healthcare for working-class Californians. He has criticized opponents, including lobbyists and the "Sacramento establishment," as being "blatantly out of touch."

Schiffer concluded by emphasizing the broader message the proposal sends to those trying to build wealth in California, suggesting it could signal that the state is no longer a favorable place for business and innovation.