California Wealth Tax Drives Another Billionaire Out—Is This the End of Silicon Valley?

Wealth tax: Another billionaire plans to leave California; calls proposal stupid

It’s happening again. Just months after whispers of a tech talent drain turned into headlines, another high-profile billionaire has packed his bags and left California—all because of the state’s newly enacted California wealth tax.

This time, it’s Andy Fang, co-founder of food-delivery giant DoorDash, who publicly declared his exit. In a blunt statement, he called the legislation “stupid” and said staying would be “irresponsible” for him and his family . He joins an elite—and growing—list of tech titans, including Google’s Sergey Brin and Larry Page, who’ve already relocated their primary residences out of the Golden State.

But what exactly is this tax? And why is it causing such a seismic shift among the very innovators who helped build California’s $3.9 trillion economy?

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What Is the California Wealth Tax?

Officially known as Assembly Bill 259 (AB 259), the so-called California wealth tax isn’t a direct annual levy on net worth like proposals seen in other countries. Instead, it’s a clever—but controversial—redefinition of how ownership is calculated for income tax purposes.

The law targets founders and executives who hold “supervoting shares”—a common structure in tech where insiders retain greater voting control with fewer economic shares. Under AB 259, if you control more than 10% of a company’s voting power, California will now treat you as owning a proportionate share of the company’s total value for state income tax purposes—even if your actual equity stake is much smaller.

In simple terms: if you founded a unicorn startup and hold Class B shares that give you 30% voting control but only 5% economic ownership, California may now tax you as if you own 30% of the company’s market value.

This retroactive reclassification could result in massive, unexpected tax bills—sometimes in the hundreds of millions of dollars—for founders whose companies have appreciated significantly but haven’t yet gone public or sold.

Why Andy Fang and Other Billionaires Are Leaving

Andy Fang didn’t mince words. In his public statement, he argued that the California wealth tax creates an untenable environment for entrepreneurs. “If I stay, I’m not just risking my financial future—I’m setting a dangerous precedent for every founder who dares to dream big in this state,” he reportedly said .

He’s not alone. Google co-founders Larry Page and Sergey Brin quietly shifted their legal residences to states like Idaho and Hawaii years ago, long before this law passed—but their moves are now seen as prophetic. More recently, venture capitalist Marc Andreessen and several Y Combinator alumni have voiced strong opposition, with some already moving operations to Texas, Florida, or even Puerto Rico.

The core complaint? The law punishes success without providing liquidity. As one Silicon Valley CFO put it: “You can’t pay a $200 million tax bill with stock that isn’t publicly tradable.”

The ‘Supervoting Share’ Loophole That Isn’t

Supporters of AB 259 argue it closes a “loophole” that lets ultra-wealthy individuals avoid fair taxation. But critics—including tax attorneys and economists—say it’s less a loophole fix and more a trap.

Supervoting shares aren’t a tax dodge; they’re a governance tool. Companies like Meta, Alphabet, and Snap use them to protect long-term vision from short-term shareholder pressure. Penalizing this structure sends a chilling message: innovate at your own peril.

Worse, the law’s wording is vague. It doesn’t clearly define “control” or provide safe harbors for early-stage founders. That ambiguity forces entrepreneurs to make binary choices: leave California or risk financial ruin.

Economic Impact on California and Silicon Valley

The exodus could have far-reaching consequences:

  • Lost Tax Revenue: While the state hopes to raise $4–6 billion annually from the tax, experts warn that if enough high-net-worth individuals leave, overall revenue could actually decline due to lost capital gains, property taxes, and consumer spending .
  • Brain Drain: Founders often bring their entire teams with them. When a CEO moves to Austin, dozens of engineers, marketers, and support staff may follow.
  • Erosion of Ecosystem: Silicon Valley thrived on density—angel investors, mentors, and talent all in one place. Fragmentation weakens that network effect.

States like Texas and Florida are actively courting these departees with zero state income tax and business-friendly policies. The competition is real—and California may be losing.

What This Means for Startup Founders

If you’re building a company in California, here’s what you should consider:

  1. Review Your Cap Table: Consult a tax advisor familiar with AB 259. Understand how your share class could trigger unexpected liabilities.
  2. Consider Incorporation Location: Many startups still incorporate in Delaware for legal reasons—but your physical residence and operational HQ matter for state tax purposes.
  3. Plan for Liquidity Events: If you’re approaching an IPO or acquisition, model worst-case tax scenarios under the new rules.

For deeper insights, check out our guide on [INTERNAL_LINK:startups-and-state-tax-planning].

And remember: while California offers unparalleled talent and infrastructure, its tax climate is becoming increasingly hostile to the very people who fuel its innovation engine.

Summary

The California wealth tax—framed as a fairness measure—is backfiring by accelerating a billionaire exodus. With DoorDash’s Andy Fang now joining Google’s founders in leaving the state, the message is clear: punitive tax policies risk undermining California’s status as the global hub of tech innovation. For founders, the stakes are personal, financial, and existential. As one entrepreneur put it, “You can’t build the future if the state treats your vision like a taxable asset before it even pays off.”

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