Congressman Ro Khanna Wants to Destroy California’s Innovation Driven Economy with New Wealth Tax

Core Viewpoint - California is contemplating a "wealth tax," a concept that has historically failed in other regions, which may further drive businesses and individuals out of the state [2][5]. Economic Context - California boasts a GDP of approximately $4 trillion, positioning it among the world's largest economies, alongside Germany and Japan [2]. - The state is home to major tech firms like Apple, Google, and Meta, contributing to its innovation-driven economy [2]. Taxation Landscape - California imposes a 13.3% income tax on high-income residents, with capital gains taxed similarly to personal income [3]. - The state sales tax is 7.25%, which can increase to 11.25% when local taxes are included, ranking California as the 48th worst state for taxes in the US [3]. Migration Trends - A significant number of firms and individuals are relocating from California to states like Florida, Texas, and Tennessee due to high taxes and political issues [5]. - The proposed wealth tax is expected to exacerbate this trend, as highlighted by venture capitalist Chamath Palihapitiya, who argues it could harm entrepreneurship [6][5]. Impact on Startups and Innovation - Taxing unrealized gains is criticized for being detrimental to entrepreneurs, as many hold shares in illiquid firms whose valuations fluctuate [7]. - The proposal is seen as an "anti-unicorn law," potentially forcing startup founders to sell assets to pay taxes, which could hinder their ability to fundraise and compete [11][10]. Corporate Exodus - A list of companies that have left California includes major names, taking over $1.3 trillion in revenue with them, indicating a significant economic impact [12]. - Once firms leave, it is challenging to attract them back, which could lead to a decline in California's innovation ecosystem [13]. Political Commentary - Congressman Ro Khanna's remarks suggest a dismissive attitude towards the departure of innovators and wealth creators from California [9]. - The proposal has drawn criticism from various venture capitalists and entrepreneurs, who argue it undermines job creation and economic growth [14][10]. Comparative Analysis - The article draws parallels with European countries that have implemented similar taxes, noting that such policies have led to wealth flight and economic decline [11][17]. - The ongoing decline of Europe is referenced as a cautionary tale for California, suggesting that prioritizing public services over innovation could lead to broader economic issues [17].