A proposed wealth tax in California is generating significant anxiety among Silicon Valley founders, far beyond concerns about the state's existing 5% tax rate. The core issue lies in the proposed tax's focus on voting shares rather than actual equity ownership, a structure that could disproportionately impact founders with dual-class stock arrangements.

The New York Post highlighted the potential impact, citing the example of Larry Page, who owns approximately 3% of Google but controls roughly 30% of its voting power. Under the proposed wealth tax, Page would be taxed on that 30% control. For a company with a valuation in the hundreds of billions of dollars, this translates to a substantial tax liability. The Post further reported that one SpaceX alumni founder, currently building grid technology, could face a tax bill at the Series B stage that would effectively eliminate his entire holdings.

This potential tax structure has raised concerns about its impact on early-stage companies and innovation. Founders often rely on voting control to guide their companies through critical growth phases. A significant tax burden on these voting shares could disincentivize risk-taking and potentially force founders to relinquish control prematurely.

David Gamage, a University of Missouri law professor who helped develop the proposal, believes Silicon Valley's reaction is an overstatement. He suggested founders consult tax lawyers and utilize deferral accounts for assets they don't want taxed immediately, with California taking 5% whenever those shares eventually vest. However, the complexity and potential long-term implications of such deferral strategies remain a point of contention.

The debate surrounding this proposed wealth tax underscores the ongoing tension between California's efforts to address wealth inequality and its desire to maintain its position as a global hub for technology and innovation. The future of this proposal, and its potential impact on the tech industry, remains uncertain, but it has undoubtedly sparked a critical conversation about the balance between taxation and incentivizing entrepreneurial activity.