A proposed wealth tax in California is causing significant unease in Silicon Valley, potentially triggering an exodus of tech founders and companies. The concern isn't the state's existing 5% tax rate, but rather the structure of the proposed tax, which targets voting shares instead of actual equity ownership.

The proposed wealth tax could have a devastating impact on founders who hold dual-class stock structures, which are common in the tech industry. These structures allow founders to maintain significant control over their companies even with relatively small equity stakes. For example, Larry Page, who owns approximately 3% of Google, controls roughly 30% of its voting power through dual-class stock. Under the proposed tax, Page would be taxed on that 30% control, a figure representing a substantial portion of Google's hundreds of billions of dollars valuation. The New York Post reported that one SpaceX alumni founder, currently building grid technology, could face a tax bill at the Series B stage that would completely eliminate his holdings.

This potential tax burden is raising alarms throughout the venture capital and startup ecosystem. While proponents of the tax, like University of Missouri law professor David Gamage, argue that founders could utilize deferral accounts to avoid immediate taxation by giving California 5% of the shares when they are eventually sold, the uncertainty and potential long-term financial implications are driving founders to consider relocating to states with more favorable tax policies.

The tech industry's reliance on innovation and rapid growth makes it particularly sensitive to tax policies that could hinder investment and discourage entrepreneurship. If a significant number of founders and companies leave California, it could negatively impact the state's economy and its position as a global leader in technology.

The future of the proposed wealth tax remains uncertain, but the debate surrounding it highlights the growing tension between the state's need for revenue and the tech industry's desire for a stable and predictable business environment. The outcome could have significant implications for the future of Silicon Valley and the broader tech landscape.