California's Ro Khanna faces Silicon Valley backlash after embracing wealth tax

Democratic Representative Ro Khanna has sparked significant backlash from his Silicon Valley allies after endorsing a wealth tax in California. The proposal, which aims to introduce a statewide tax on billionaires, is being pushed by labor groups and could appear on the ballot in November, igniting a fierce debate among Democrats and tech leaders alike. As the proposal gains traction, some tech executives are threatening to leave California if the measure is passed. In a recent social media post, Khanna referenced President Franklin Delano Roosevelt’s sarcastic remarks about wealthy individuals threatening to leave, stating, 'I will miss them very much.' This comment only fueled the ire of tech leaders, prompting calls for him to face a primary challenger. Martin Casado, a partner at Andreessen Horowitz, expressed his discontent, saying, 'Ro has done a speed run alienating every moderate I know who has supported him. Including myself.' Garry Tan, CEO of Y Combinator, echoed this sentiment, urging for Khanna to be primaried. Notably, both firms are among the top contributors to Khanna's congressional campaign. The proposed 2026 Billionaire Tax Act would impose a one-time 5% tax on the assets of billionaires in California to address a projected deficit in the state's healthcare budget. If sufficient signatures are gathered, the decision will rest with California voters, with the tax set to be retroactive to January 1, 2026. Tech leaders are particularly concerned about the implications of taxing unrealized gains, which means that startup founders with a net worth exceeding $1 billion, based on the value of their private stock, would owe taxes on wealth that is not yet liquid. Reddit co-founder Alexis Ohanian highlighted the need for society to address the growing wealth gap, but firmly opposed taxing unrealized gains. Governor Gavin Newsom, also a Democrat and potential presidential candidate in 2028, has voiced his opposition to state-level billionaires' taxes, emphasizing the need for a pragmatic approach that considers the competitive landscape with other states. Despite the growing pressure for Democrats to support taxing the wealthy—evidenced by a Pew Research Center poll showing 58% of Americans favoring higher taxes on incomes over $400,000—Republicans are making inroads in Silicon Valley, traditionally a Democratic stronghold. Many tech CEOs have sought to influence President Donald Trump, who has appointed several tech leaders to his administration. Khanna, who won California's 17th Congressional District by a substantial margin in 2024, reaffirmed his support for a wealth tax. He argued that a modest tax would not deter entrepreneurs from starting companies or benefiting from California's innovation ecosystem. However, billionaire investor Vinod Khosla disagreed, warning that top talent would likely relocate out of the state in response to the tax. In a statement, Khanna’s spokesperson underscored the congressman’s commitment to technology and entrepreneurship, noting his co-authorship of the CHIPS and Science Act, which aims to bolster domestic semiconductor manufacturing. The spokesperson emphasized Khanna's intention to balance wealth taxation with considerations for startup founders facing unique financial challenges.