California is about to find out whether taxing billionaires is an idea that works in practice the same way it works in a speech.
A ballot measure heading to voters in November is forcing that question into the open, and the fight it has triggered between a $10.6 billion investor and a sitting congressman says more about the difficulty of the idea than either man intended.
Mark Cuban spent the weekend of August 15 on X, tearing into Rep. Ro Khanna’s defense of California’s proposed 5% one-time tax on billionaire wealth.
What started as a policy disagreement became something more pointed, and the specifics of what each man said reveal exactly why wealth taxes that sound simple on paper tend to fall apart in the details.
Mark Cuban wealth tax argument and the startup founder liquidity problem
The core of Cuban’s argument isn’t that billionaires shouldn’t pay taxes. He’s made clear he has no problem paying taxes. He paid $288 million to the IRS in a single year and said he was proud of it.
What he objects to is taxing wealth that doesn’t exist as cash.
A startup founder who built a company now worth $2 billion on paper has a $100 million tax bill under this measure. But if that $2 billion is in company shares that can’t be sold without triggering a collapse in the company’s valuation, the founder doesn’t have $100 million.
They can’t borrow it easily against shares in a company less than a year old. They can’t pay it. That’s the scenario Cuban is describing when he says the tax is the “biggest F you in the history of entrepreneurship. Ever.”
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“Ro, that’s insane. You want the state to loan money to the founder, who will then immediately give it back to the state as a wealth tax? Meaning the state has not received any incremental receipts? What’s the point of that?” Cuban wrote on X. He also said that if the tax passes, “only idiot startup founders stay in Cali,” and that he would make leaving the state a condition of any future investment he makes in a multi-billion dollar startup.
Ro Khanna government loan fix and why billionaire tax critics aren’t buying it
Khanna’s answer to the liquidity problem was a government loan. California would lend the money to illiquid founders, secured against their shares. The loan would be repaid in cash or the state would take the shares. A non-recourse structure, he called it.
Cuban’s response was immediate. If the founder defaults and the state ends up owning shares, California becomes a stakeholder in private companies.
“I’m sure the investors in those companies will be thrilled about their new partners,” he wrote.
The sarcasm was the point. State government as venture co-investor is not a problem anyone has solved, and the governance questions alone would make the structure deeply unattractive for the companies involved.
Khanna pushed back with names. Jensen Huang, Lisa Su, Sundar Pichai. Executives he said would stay in California regardless. He argued that roughly 72% of billionaire wealth nationally sits in liquid public stock, and that most of California’s 250 billionaires wouldn’t need a loan in the first place, according to Bloomberg.
The proposal also drew rebukes from Anduril Industries co-founder Palmer Luckey and investor Bill Ackman.
Both men are partially right. Huang, Su and Pichai do run companies with highly liquid share structures. Cuban’s concern is the startup founder two years in, not the CEO of a Nasdaq-listed company.
That’s a narrower population than the headline suggests, but it’s also the population that produces the next Nvidia or AMD.
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California Proposition 40 Billionaire Tax Act details and opposition funding
The measure, formally known as the Billionaire Tax Act, would levy a one-time 5% tax on the net worth of California residents worth more than $1 billion as of January 1, 2026. It covers stocks, bonds, private business interests, art, collectibles and intellectual property, according to CalMatters.
Backers, led by the healthcare union SEIU-UHW, estimate it raises close to $100 billion, with 90% earmarked for healthcare and the rest split between education and food assistance. That’s the political case. The practical one is more complicated.
California’s own Legislative Analyst’s Office has warned the state could lose hundreds of millions in future income tax revenue annually if enough billionaires leave. Some already have.
Google co-founders Larry Page and Sergey Brin were among at least half a dozen high-profile billionaires who relocated assets, businesses or residences before the vote even happens. The theoretical bill for Page alone, with a net worth around $270 billion, would approach $13.5 billion.
Opposition has raised more than $118 million against the measure, with Ripple co-founder Chris Larsen funneling millions into the campaign. The constitutional question over taxing unrealized gains hasn’t been resolved either.
Any federal equivalent would face immediate legal challenge, and California’s version isn’t immune to that argument.
Federal wealth tax 2026 Bernie Sanders Ro Khanna bill and what states are doing
Khanna and Vermont Senator Bernie Sanders have separately pushed a federal wealth tax bill targeting Americans worth more than $1 billion. Maine has already added a surcharge on high earners.
JPMorgan doesn’t expect Congress to seriously consider a national wealth tax for at least another two and a half years, leaving states to test the idea first, according to TheStreet.
Even California Governor Gavin Newsom, who has made taxing the wealthy a national platform, opposes his own state’s version of the idea. That contradiction is the most revealing detail in the whole debate.
If the governor who has built his brand on progressive taxation thinks this specific version goes too far, the implementation problem is real, not just a talking point from the opposition.
The fight between Cuban and Khanna is going to keep running. But the more useful question isn’t who won the argument on X. It’s whether California can design a wealth tax that captures the revenue it’s promising without accelerating the exodus of the people it’s taxing.
That answer arrives in November.
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