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Cryptocurrency and tech industry heavyweights are fiercely opposing California's proposed "Billionaire Tax of 2026." The bill would impose taxes even if assets remain unsold, raising concerns that it could lead to a wealthy exodus from California.
California proposes a 5% wealth tax on assets exceeding $1 billion.
The Billionaire Tax Act, a California initiative currently being pushed for the 2026 election, is facing opposition from wealthy individuals and businesses. The bill would impose a one-time 5% tax on residents with a net worth exceeding $1 billion (approximately KRW 1.4351 trillion). A key provision is the taxation of "unrealized gains," such as unsold stocks and shares. The revenue collected from this tax would be used to fund state public services, including healthcare and welfare.
The crypto and tech industries strongly oppose the idea of paying taxes without cash.
The bill's announcement sparked a wave of criticism, particularly from cryptocurrency and tech entrepreneurs. Kraken co-founder Jesse Powell warned on his X (formerly Twitter) account, "This will truly be the final warning," adding, "Billionaires will be moving their spending, giving, jobs, and capital elsewhere."
Hunter Horsley, CEO of Bitwise, also expressed opposition, arguing that "taxing unrealized profits threatens the very structure of startup ownership." They argue that forcing taxes on companies with no cash flow, as most of their assets are tied up in company shares or unlisted equity, defies both practicality and equity.
Billionaire investor Peter Thiel also expressed opposition, suggesting a possible departure from California. Thiel joined his industry peers in stating, "This tax policy will ultimately lead to an exodus of capital and talent."
Supporters of the bill argue that the wealthy have been enjoying excessive tax benefits.
Supporters of the bill, however, argue that it's a necessary measure to address California's budget deficit and healthcare funding shortfalls. Supporters, including the Service Employees International Union-UHW (SEIU-UHW), argue that "billionaires' assets increase significantly each year, but they don't actually sell, making the existing tax system incapable of taxing their value," and that "we need a shared responsibility commensurate with the growth in their assets."
This explains the logic behind the idea that "we should tax the portion of assets that have increased in value, even if they haven't been sold." In particular, arguments from human rights and economic justice perspectives are being raised, arguing that without this tax, the growing wealth gap will be left unchecked.
Political circles are also on edgeโฆ โConcerns about shrinking investment and tax revenue lossโ
Political circles and economic experts are also debating the economic impact of this bill. While there are expectations that its passage could secure hundreds of billions of won in tax revenue in the short term, there are also concerns that in the long term, it could weaken California's growth foundation through the relocation of the wealthy and high-growth companies and a decline in new investment.
The bill would need to collect about 875,000 signatures from voters to actually be put on the ballot, and if passed, it could take effect in 2026.
๐ Market Interpretation
The debate over California's billionaire tax goes beyond mere local policy; it illuminates the structural imbalances in the US surrounding the definition of wealth and taxation. The cryptocurrency and tech industries, particularly those with unrealized or illiquid assets, are particularly vulnerable to direct harm. Whether or not the proposed tax is implemented could impact their headquarters relocations and investment strategies.
๐ก Strategy Points
California-based cryptocurrency and fintech companies must review their residency and incorporation.
- Increased risk of 'cash flow-based portfolio adjustments' by large investors.
- We are observing whether there is a similar 'wealth tax' and also keeping an eye on policy changes in other states, such as New York and Washington.
๐ Glossary
Unrealized gains: theoretical gains made when the price of an asset rises, even though the stock or shares were not sold.
- Net Worth: Total assets, including cash, stocks, real estate, and equity, minus liabilities.
- Ballot Initiative: A system in which citizens directly propose specific bills and submit them to a vote.
๐ก Want to know more? AI-prepared questions for you:
A. The bill is designed as a "one-time" tax and does not have retroactive application as proposed, but the argument still exists that it should be implemented before wealthy individuals attempt to evade taxes.
A. Since the bill taxes based on "net assets," large cryptocurrency holdings may be included in the asset valuation criteria. In particular, even if unsold, significant gains in valuation may be subject to taxation.
A. Currently, some countries, including France, Norway, and Spain, impose an annual wealth tax on assets exceeding a certain threshold. However, the frequent overseas relocation of wealth makes it difficult to maintain this taxation. California differs in that it is a one-time tax.
TP AI Precautions
This article was summarized using a TokenPost.ai-based language model. Key points in the text may be omitted or inaccurate.
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