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Democrat Rep. Ro Khanna has embraced a wealth tax in his home state of California, and his longtime allies in Silicon Valley are now threatening to abandon him. California labor groups are trying to add a proposal for a statewide tax on billionaires to the November ballot. The proposal is causing a rift among Democrats and enraging some in the tech community, who warn they will leave the state if the measure is adopted. Khanna last week reacted to the potential exodus in a social media post, saying he echoes what President Franklin Delano Roosevelt said with "sarcasm of economic royalists when they threatened to leave, 'I will miss them very much.'" The post prompted not only criticism from tech leaders but also calls for Khanna to be primaried. "Ro has done a speed run alienating every moderate I know who has supported him. Including myself," wrote Martin Casado, a partner at venture capital firm Andreessen Horowitz, in a post on X. "At least that makes voting him the f--- out all the more gratifying."
Garry Tan, CEO of startup accelerator Y Combinator, wrote it's "Time to primary him." Associates of Andreessen Horowitz and Y Combinator are among the top donors to Khanna's congressional campaign committee, according to recent campaign finance disclosures. The proposed ballot measure, dubbed the 2026 Billionaire Tax Act, is being pushed by the Service Employees International Union-United Healthcare Workers West labor union. If enacted, it would levy a one-time 5% tax on the assets of California billionaires to shore up an expected shortfall in the state's healthcare budget. Should the measure garner enough signatures to qualify for the ballot, it will be up to California voters to decide whether implement the tax, which would be retroactive to Jan. 1, 2026. A major reason that tech investors, executives and entrepreneurs are united in vocal opposition is the concern that the tax would apply to unrealized gains. That means that startup founders with a net worth of over $1 billion based on the paper value of their private stock would have to pay tax on their wealth even though it's illiquid. "We're absolutely going to have to figure out how our society adapts to a rapidly increasing wealth gap," wrote Reddit co-founder and venture investor Alexis Ohanian, in a post on Sunday. "But the answer is definitely not taxing unrealized gains."
California Governor Gavin Newsom attends the UN Climate Change Conference (COP30), in Belem, Brazil, Nov. 11, 2025. Adriano Machado | Reuters
Democratic California Gov. Gavin Newsom, who is widely considered a contender for the presidency in 2028, opposes state-level billionaire taxes. "You can't isolate yourself from the 49 [other states]," Newsom said at the New York Times Dealbook conference earlier this month. "You've gotta be pragmatic about it." But pressure is growing nationally for Democrats to back efforts to tax the wealthy, as polls repeatedly show wide support for the idea. A Pew Research Center poll earlier this year found that 58% of all Americans support raising taxes on those making more than $400,000. Among the Democrats surveyed, 74% supported the higher taxes. Republicans, meanwhile, have been making increasing inroads in Silicon Valley, home to a number of tech billionaires who have traditionally leaned Democratic. Tech CEOs this year have flocked to the White House to curry the favor of President Donald Trump, who has placed tech leaders in roles within his administration. Khanna carried California's 17th Congressional District by more than 30 points in 2024. The deep blue seat would be highly unlikely to flip to Republicans in 2026. In a follow-up post on X, Khanna restated his support for a wealth tax. "Yes, we need entrepreneurs to commercialize disruptive innovation," Khanna said. "But the idea that they would not start companies to make billions, or take advantage of an innovation cluster, if there is a 1-2 percent tax on their staggering wealth defies common sense and economic theory." Vinod Khosla, the founder of Sun Microsystems and Khosla Ventures who boasts a net worth of about $12.6 billion according to Forbes, disagreed with Khanna and said the billionaires will leave the state. "You are so wrong Ro," Khosla said in a post to X. "Top prospects for generating wealth in the state will almost certainly leave the state. Every advisor would advise every enterprise that gets big momentum to have key people relocate to another state." Sarah Drory, a spokesperson for Rep. Khanna, told CNBC in a statement that the congressman is a "passionate supporter of technology and entrepreneurship," noting that he co-wrote the CHIPS and Science Act, a federal program designed to boost domestic semiconductor manufacturing. "He has always supported a modest wealth tax on billionaires to deal with staggering inequality and to make sure people have healthcare," Drory wrote. "He has advocated for common sense workarounds for startup founders whose companies are not profitable and who have illiquid stock." WATCH: Investors underestimating the AI revolution, analyst says