J.D. Tuccille: The progressive plan to loot Silicon Valley keeps getting worse

Representative Ro Khanna, a Democrat from California, speaks during a rally in support of Prop 40 in San Jose, California, US, on Tuesday, Aug. 18, 2026. California billionaires would face a one-time 5% tax on their wealth through a ballot initiative that advocates say could bring in about $100 billion to cover state health-care costs. Photographer: Jason Henry/Bloomberg via Getty Images Photo by Jason Henry /Bloomberg via Getty Images

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Rep. Ro Khanna (D-CA) has an idea for promoting his pet wealth tax. To prosperous Californians who say their wealth is tied up in businesses that create value but don’t offer a lot of liquid cash to pay massive tax bills, the progressive politician responds that the government could loan them the money secured by pledges of corporate stock. That sparked a dispute with entrepreneur Mark Cuban who argues that it sounds more like a plan for creeping nationalization than for raising revenue.

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“The California Democratic Party and the California labor movement just stood with @BernieSanders and me in supporting 5% wealth tax on 250 California billionaires,” Khanna posted on X on Aug. 15. “California voters want a Democratic Party that will stand up for the working class over the billionaire class.”

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Even before Californians vote on the wealth tax proposal in November, the plan has already driven some high-net-worth individuals to leave the state. In January, venture capitalist Chamath Palihapitiya estimated that US$1 trillion of wealth had fled from California to avoid getting an expensive financial haircut that might be repeated in the future. Unsurprisingly, non-fans of punitive taxation pushed back against Khanna’s boast.

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Mark Cuban, a Texas resident who has amassed billions of dollars from repeated tech startups, pointed out that no matter their paper worth, most company founders “are the definition of cash poor, stock rich.” He asked Khanna, “How are you going to tax them? Make them borrow money against their shares, if they can?” He emphasized that banks are already leery of debt-heavy startups, and unlikely to loan more money just to cover tax bills.

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Khanna responded that if banks won’t loan the money the California government should.

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“Allow illiquid founders to pledge shares with a loan from the government to pay tax. The loan period is long but not infinite (e.g. 10 years),” the lawmaker suggested. “The loan is non-recourse: at the end of the period, the loan is either paid back in cash, or the government assumes the shares.”

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Cuban snapped back that having the state government loan entrepreneurs money to pay taxes to the state government makes no sense “(u)nless of course you want the gov to own shares.” The Texas businessman added that the implications would be demoralizing for investors who backed motivated founders only to see them muscled aside by state officials. “Cali, You make it. We take it!” he snarked.

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Palmer Luckey, founder of companies including Anduril Industries, complained that the proposed tax “makes founder-led companies practically illegal” since it taxes founders not just on their ownership interest, but on their voting power in the company. “If a founder-CEO of a $1B private company owns 3% but keeps 100% of the voting power, he gets taxed on the value of the whole company.“