California faces backlash for proposed 5% wealth tax 

• A 5% tax is proposed on net wealth above $1 billion with the purpose of funding the healthcare system in California. 
•  The billionaires may pay the tax either in one instalment or over five years with interest payments. 

Crypto officials have reacted to the recent 5% tax proposed on billionaires’ wealth in California and stated that it would lead to a large-scale exit of money from the country and withdrawal of entrepreneurs. They further argued that the proposed tax would be wasted anyway. 

According to the 2026 Billionaire Tax Act, a 5% tax is proposed on net wealth above $1 billion with the purpose of funding the healthcare system and state assistance programme, as mentioned by the SEIU United Healthcare Workers West Union. 

As the financial obligations of the tax are calculated, in part, based on the potential profits from assets they hold but have not sold yet, some defined taxpayers may need to sell stocks or parts of their businesses to raise funds to pay the tax. The billionaires may pay the tax either in one instalment or over five years with interest payments. 

Some prominent names of the crypto industry, such as the chief executive officer of Bitwise, Hunter Horsley, argue that this initiative will lead to billionaires leaving the state, having an overall negative effect. 

On 28th December Powell tweeted, ‘I assure you this will be the final straw and Billionaire will have to take them all of their spending, hobbies, philanthropy and jobs.’ He also asked to solve the waste/fraud issue. 

The Defense of The Bill 

US Representative Ro Khanna has defended the bill, saying that it will help in funding better childcare, housing and education, which will eventually aid American innovation. Nic Carter, the founding partner of Castle Island Ventures, mentioned that he generally likes Ro and had words with some of the staff, but he wonders if they have done an analysis of capital mobility in response to wealth taxes. 

The chief executive officer of Dune, an on-chain data platform, Fredrik Haga, mentioned that Norway also tried to propose a similar tax model, which eventually led to a mass exodus of the wealthy from the country and generated fewer funds than expected. 

The CEO further mentioned that taxes on unrealised capital gains have resulted in more than half of the wealth held by the top 400 taxpayers of Norway moving abroad.  The founder of Bitwise highlighted the December audit from the California State Auditor, which mentioned issues with how taxpayer funds have been spent, consisting of unaccounted-for or poorly justified expenditures. 

He further mentioned that Ro doesn’t have a serious plan to fix this. Instead, he is spending time on a new private citizen asset confiscation to have more money for the government, and politicians have forgotten that their role is to be a servant. 

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