Billionaire investor Mark Cuban has sharply criticized California's proposed one-time 5% tax on billionaires, telling Democratic Congressman Ro Khanna that "Ideology is not a strategy." The controversial measure, known as Proposition 40, is slated for the November ballot.
Khanna, a proponent of the tax, had celebrated the California Democratic Party's endorsement of Proposition 40, stating, "California voters want a Democratic Party that will stand up for the working class over the billionaire class." However, Cuban argued that Khanna was misreading the state's economic landscape.
Cuban pointed to the proliferation of "unicorn" startups in California, particularly in Silicon Valley, which have seen significant growth fueled by investor interest in artificial intelligence. He noted that founders of these companies can become billionaires rapidly through funding rounds, often holding their wealth in stock rather than cash. "They are the definition of cash poor, stock rich," Cuban explained, questioning the practicality of taxing individuals in such a financial position. "Do you really think each of multiple founders, who started an amazing company in Cali and is now a billionaire, can each just pull out $250m per billion of net worth from their raise? You know they can't."
Cuban also asserted that if Proposition 40 passes, investors and businesses would actively seek to avoid California. He stated he would make it a requirement for any multi-billion dollar startup he invests in to relocate from the state. "If this passes, only idiot startup founders stay in Cali," he said.
Khanna, however, appeared unconvinced, probing Cuban on alternative methods to tax billionaire startup founders whose net worth is not liquid.
Recent polling indicates a divided electorate on Proposition 40, with 48% in favor, 41% opposed, and 11% undecided. The initiative faces competition from other ballot measures, with billionaires like Sergey Brin reportedly investing in competing initiatives that could potentially supersede Proposition 40 if they receive more votes.
The proposed tax has created a rift within the Democratic party. While many labor groups support it as a means to offset federal health cuts, prominent figures such as Governor Gavin Newsom have expressed concerns that it could harm the state's economy.