Cryptocurrency industry executives are strongly opposing California's proposed 5% wealth tax on billionaires with net worth exceeding $1 billion. The state government claims the tax will fund healthcare and various welfare and support programs, but the industry is concerned about undermining entrepreneurship and potentially leading to a massive capital outflow.
Hunter Horsley, CEO of Bitwise, argued that the tax "effectively punishes high-risk, innovative industries" and could weaken California's technological competitiveness in the long term. He particularly took issue with the inclusion of unrealized profits in the tax, arguing that this could place an undue burden on those in industries subject to high asset price volatility.
Nick Carter, founding partner of Castle Island Ventures, also joined the ranks of critics. He warned that "taxing assets not yet liquidated is a discouraging sign of investment and entrepreneurship," and that billionaires are likely to relocate or transfer assets overseas to avoid taxes.
Jesse Powell, co-founder of Kraken, expressed a similar view. He questioned whether tax-funded funds would be used efficiently, saying, "Unless the inefficiencies of government spending are addressed, high-tax policies are unlikely to be credible."
This wealth tax bill is sparking controversy because it could apply to some unrealized gains. Consequently, billionaires subject to the tax may be forced to sell their stocks or unlisted company shares in a lump sum or in installments over up to five years to pay the tax. Market concerns are also growing that a large-scale asset sale during this process could have a negative impact on the stock market and the venture investment landscape.
As California is considered the largest technology and innovation hub in the United States, if this wealth tax discussion leads to actual legislation, it is expected to have a significant impact not only on the cryptocurrency industry but also on the investment landscape of Silicon Valley as a whole.
