A Five-Percent Tax Could Come With Bigger Costs

California’s ballot plan to seize 5% of billionaire wealth, including illiquid startup stock, just ran into a buzz saw named Mark Cuban.

Story Highlights

California ballot measure would levy a one-time 5% tax on net worth over $1 billion, including non-cash assets.
Mark Cuban warns the plan would force founders to sell or borrow against illiquid stock and drive startups out.
Backers say 90% of revenue would go to health care, with the rest to schools and food aid.
Research shows taxes affect where wealthy people move, with mixed but real effects across states.

What California’s Ballot Tax Would Do, In Plain Terms

California voters will decide whether to impose a one-time 5% tax on people and trusts with net worth above $1 billion. The proposal covers non-cash assets like private business stakes, public stock, art, and intellectual property. The measure is written as an excise tax for tax year 2026 and applies to “net worth,” not just income. That means founders and investors whose wealth is tied up in companies would still get hit, even if they have little cash on hand.

Supporters say the money would go into special funds for health care and other programs. They argue most of the revenue would protect state coverage and services after federal reductions. A summary by a state-focused outlet says the plan reserves 90% for health care and the rest for public education, with payments spread over five years to ease the hit. Backers claim the tax targets only a small number of very rich residents in the state.

Mark Cuban’s Warning: Illiquid Wealth, Real-World Damage

Mark Cuban told Representative Ro Khanna that taxing paper wealth would force founders to sell shares or borrow at bad terms. He said many early-stage founders are “cash poor, stock rich” and would need to dump equity to pay the bill. He warned that investors and startups would pick other states if California punishes ownership before a sale or paycheck even happens. He called the plan “ideology, not strategy,” and said he would move new investments elsewhere if it passes.

That warning hit a live nerve in the tech world. Founders often hold big, illiquid stakes while building a company, paying themselves modest salaries. Forcing a one-time payment based on net worth, not realized gains, changes risk math overnight. It can trigger fire sales, depress valuations, and crimp hiring. It can also push both talent and capital to friendlier states. Cuban’s point is simple: punish the builders, and they will build somewhere else — and take jobs, patents, and tax base with them.

Do High Taxes Push Out the Wealthy? What the Data Shows

Studies of wealthy taxpayers show taxes do affect where people move, though the size of the effect varies by place and policy. New Internal Revenue Service migration data reviewed by a taxpayer group shows Florida and Texas gained many high-income filers while California lost many, aligning with tax differences. Other research finds the rich are more mobile than most people, and they do respond to higher taxes, even if not in a stampede.

Academic work on millionaire migration finds real but mixed effects. Some studies show notable outflows when top rates rise, while others show modest shifts. But a wealth levy on illiquid assets is different from an income tax. It targets the base that funds startups. That raises the stakes. If even a small share of top founders leave, the loss of future initial public offerings, jobs, and income taxes could dwarf a one-time haul. The net effect could be negative for growth and revenue over time.

Health Care Promise vs. Economic Risk

Backers promise most of the money will stabilize health care programs. They argue it prevents coverage cuts and keeps hospitals open. Those are serious goals. But tying them to an untested grab of illiquid wealth creates new risks. If founders sell stock fast, share prices can fall. If they borrow, they face high rates. If they move, the state loses future income tax streams and jobs. A “one-time” hit can have long shadows if it scares off builders.

Ro Khanna wants a 5 percent wealth tax on California's billionaires.

Sounds simple. It is not a tax. It is a takeover.

Trace it with me.

Most of that wealth is not cash in a bank. It is stock in the companies these people built. You cannot hand the state 5 percent of a company…

— Fabian 🇺🇸 (@thefabiangarcia) August 21, 2026

California is not acting in a vacuum. Competing states offer lower taxes and fewer shocks. Under President Trump, federal regulators and agencies have pushed for growth, energy production, and simpler rules. States leaning into growth are winning people and paychecks. California can fund care without punishing ownership or risking capital flight. Voters now face a clear choice: short-term cash from illiquid wealth, or long-term growth that keeps families working and free.