A proposal to introduce a 5% tax on billionaire wealth in California has prompted sharp criticism from figures across the cryptocurrency industry, who warn it could accelerate capital flight and drive entrepreneurs out of the state without delivering the intended benefits.

The ballot initiative, titled the 2026 Billionaire Tax Act, would impose a 5% levy on net wealth exceeding $1 billion, with proceeds earmarked for healthcare funding and state assistance programs, according to the SEIU United Healthcare Workers West union.

Because the tax would partially apply to unrealized gains, affected individuals could be forced to sell shares or portions of their businesses to cover the liability. Payments could be made in a single installment or spread over five years with interest. The union has formally submitted the measure for inclusion on the November 2026 general election ballot.

Crypto leaders warn of capital flight

Several senior crypto executives have argued that the tax would ultimately push billionaires to relocate, taking investment, spending and jobs with them. Bitwise CEO Hunter Horsley and Kraken co-founder Jesse Powell were among those voicing concern about the broader economic impact. “I promise you this will be the final straw. Billionaires will take with them all of their spending, hobbies, philanthropy and jobs. Solve the waste/fraud issue,” Powell said in an X post on Sunday.

The proposal has also drawn scrutiny from investors focused on capital mobility. Castle Island Ventures founding partner Nic Carter and ProCap BTC chief investment officer Jeff Park both suggested the measure could incentivize wealthy individuals to move assets out of California.

“I generally like Ro and have interacted with some of staff who have always been fantastic, but I do wonder — have they done an analysis of capital mobility in response to wealth taxes?” Carter said on Sunday. “It seems to me that capital is more mobile than ever, and one time wealth taxes are a signal to capital — like a sovereign default — that more can be expected in the future,” he added.

Supporters defend tax as investment in innovation

One of the most prominent defenders of the initiative is US Representative Ro Khanna, a cryptocurrency-friendly Democrat representing California’s 17th Congressional District. Khanna has argued in a series of X posts that the tax would fund improvements in childcare, housing and education, which he says would ultimately strengthen innovation and economic opportunity in the United States.

Critics, however, point to international examples where similar policies failed to deliver expected results. Fredrik Haga, co-founder and CEO of on-chain data platform Dune, cited Norway’s experience with wealth taxes as a cautionary tale.

“Friendly reminder to California: Taxes on unrealized capital gains have led to more than half of the wealth held by Norway’s top 400 taxpayers moving abroad,” Haga said. “Norway has become more equal and made everybody poorer and worse off, just as expected from strong socialist ideas.”

Concerns over use of public funds

Skepticism has also been fueled by concerns about how additional tax revenue would be managed. Austin Campbell, a New York University professor and founder of Zero Knowledge Consulting, alongside Horsley, referenced a December audit by the California State Auditor that highlighted problems with public spending, including funds that were unaccounted for or lacked sufficient justification.

“But what Ro has a plan for is not pulling the fire alarm and fixing this. Rather what he’s been spending time on is a new private citizen asset confiscation to have more money for the government. Politicians have long forgotten their role is to be a servant,” Horsley said.

Sources:

https://www.auditor.ca.gov/wp-content/uploads/2025/12/2025-601_Report-WordPress.pdf?utm

https://cointelegraph.com/news/california-billionaire-tax-crypto-executives-slam

https://x.com/CampbellJAustin/status/2005299661444170176

https://x.com/JohnEDeaton1/status/2005311448847630558

https://x.com/RoKhanna/status/2004909206445465706

https://x.com/HHorsley/status/2004744520122974603

https://x.com/dgt10011/status/2005316949430219037

https://x.com/HHorsley/status/2004744520122974603

https://x.com/jespow/status/2005111142453313878

https://www.seiu-uhw.org/ca-billionaire-tax-act/