California’s proposed 2026 Billionaire Tax Act is drawing sharp criticism from crypto industry participants, who argue the measure could push wealth and innovation out of the state while creating limited benefits for public services. Introduced by the Service Employees International Union United Healthcare Workers West, the proposal would impose a 5% annual tax on net wealth above $1 billion to help address a projected $30 billion shortfall in the state’s Medi-Cal healthcare program.
The tax would apply broadly across assets, including public equities, private businesses, real estate, art, and digital assets such as cryptocurrencies. Under a mark-to-market framework, the levy would be assessed on unrealized gains, with payments required either upfront or over five years with an added deferral charge. Critics say the structure could force founders and investors to liquidate illiquid holdings, potentially reducing control over companies or triggering cascading tax liabilities.
Capital Mobility and Institutional Concerns
Crypto executives and venture investors have been among the most vocal opponents, citing heightened capital mobility within the digital asset sector. Many argue that taxing unrealized gains amounts to a de facto confiscation of wealth that has often already been subject to prior taxation, particularly when assets must be sold to meet tax obligations. Concerns around double taxation and liquidity strain have been amplified, given the concentration of crypto wealth in volatile and non-cash assets.
From an institutional perspective, opponents warn that the proposal could weaken California’s competitive position relative to other states courting technology and crypto firms with more favorable tax regimes. Several market participants likened the policy signal to a sovereign-style wealth grab, suggesting it could alter long-term investment decisions and discourage founders from building companies in the state.
Policy Debate and Global Comparisons
Supporters of the proposal argue that the tax could help address inequality and stabilize funding for essential services such as healthcare, housing, and education. Proponents frame the measure as a response to rising wealth concentration, particularly in technology hubs, and as a mechanism to align public finances with the scale of private fortunes generated in the state.
Critics, however, point to international precedents, including Norway’s wealth tax experience, where significant portions of high-net-worth capital reportedly relocated abroad. Industry observers argue that such outcomes can ultimately reduce the tax base and dampen economic activity. As a ballot initiative, the measure must still gather sufficient signatures and is likely to face legal scrutiny, leaving its ultimate impact uncertain amid an increasingly competitive landscape for global capital.