Vinod Khosla isn’t packing his luggage. As a wave of Silicon Valley billionaires quietly (and even loudly) sever ties with California over a proposed wealth tax that would levy a one-time 5% cost on property held by residents price $1 billion or extra, the legendary enterprise capitalist and Solar Microsystems co-founder says he’s staying put—at the same time as he sounds the alarm about what he calls everlasting harm to the state’s tax base.
“California will lose its most important taxpayers and net off much worse,” Khosla wrote on X in late December, responding to Rep. Ro Khanna’s vocal assist for the measure. And in a warning that goes past the billionaire class, Khosla added that “even people who don’t expect this initiative to pass are still planning to leave because there will be another one.”
It’s a placing posture for one of many Valley’s most distinguished voices: a person prepared to criticize the coverage loudly whereas refusing to flee it. As he advised Fortune Editor-in-Chief Alyson Shontell in a latest interview on the Fortune 500 Titans and Disruptors of Trade podcast, he has “no plans to leave California.”
He argued that the state is taking part in a harmful recreation. “You’re permanently reducing the tax base on an ongoing basis to get a one shot,” he mentioned. “That’s what a junkie does, a one-time shot. I don’t care about the next 20 years of capital that will be taxes.”
Khosla mentioned one estimate he noticed acknowledged plenty of the state’s wealthiest residents have already left. “Annual income from California, from that trillion that is left, is gone if this tax passes.” He did supply a suggestion of one thing that might deal with the state’s points higher.
A tax that’s rattling California’s billionaires class
For Khosla, a billionaire and co-founder of Solar Microsystems who made his fortune in Silicon Valley, the query isn’t simply theoretical. At 71, he stays deeply invested in California’s future—actually and figuratively.
“I can’t be fired. I’ve never worried about a career. I don’t need more money,” he mentioned. “I sort of have this freedom to do what I want.” And, as a proud Californian and American, he added that he thinks it’s vital for individuals to talk up. “I have the luxury, so I definitely owe it to a country that’s been really good to me.”
The proposed Billionaire Tax Act—backed by the Service Staff Worldwide Union-United Healthcare Staff West and accredited for signature assortment by the California Secretary of State in December 2025—would require Californians price over $1 billion to pay a one-time 5% tax on their whole property, with the choice to unfold funds over 5 years. Supporters say it might generate $100 billion to offset anticipated federal cuts to healthcare spending.
Whereas the proposal is politically well-liked, Khosla advised Shontell it “doesn’t structurally solve the problem beyond the one-time shot of income … It’s silly.” He acknowledged that the state’s social security internet, particularly in well being care, training, and meals help, wants extra funding, however he has been one of many loudest critics of the tax, calling Khanna’s assist for it “commie” on X and accusing the congressman of performing out of private political ambition fairly than sound financial reasoning.
“So many entrepreneurs who own 20% of their company are talking about leaving now in case somebody takes another shot,” Khosla advised Shontell, “because junkies come back and take another shot.”
Relatively than a wealth levy, Khosla advocates for systemic federal reform that might basically reshape how America taxes the wealthy—with out driving them away.
“If, at the federal level, we doubled capital gains tax or made it all uniform one tax, then we will equalize and balance between economic profitability and economic growth and investment,” he defined, referring to an notorious loophole that has existed within the tax code since nearly the invention of the earnings tax itself, within the early twentieth century. His particular proposal: remove preferential remedy for capital positive factors fully, taxing all earnings—whether or not from work or investments—on the identical charge.
The twist? Use the income windfall to exempt most Individuals from taxation altogether.
“The next presidential campaign, I hope, gets behind nobody pays income tax below $100,000 a year starting 2030,” Khosla mentioned. “That shortfall is made up by increase in the capital gains tax to be the same as ordinary income… It makes it tax neutral, no more taxes, but much fairer distribution of income.”
This math would work in favor of working Individuals, Khosla argued: “Forty percent of all capital gains is paid by people making more than $10 million a year,” he famous. “There’s 123 million people, roughly, that make less than $100,000 a year, and you make all taxes go away for them.”
His message to voters: “They will vote for a candidate who says no taxes if you make less than $100,000.” He admitted it was “just one idea” however it might a minimum of be a structural change that might make sense. He added that he’d be shocked if some type of structural change doesn’t occur earlier than 2040.
Going after ‘buy, borrow, die’
Khosla’s proposal immediately targets the “buy, borrow, die” technique that enables ultrawealthy Individuals to stay off borrowed cash secured by appreciating property—by no means triggering earnings or capital positive factors taxes. After they die, their heirs inherit with a stepped-up price foundation, erasing many years of embedded positive factors.
Tech investor Dave Friedberg, co-host of the All-In podcast, supplied an identical prognosis: “There’s a simple way to address it, which is to charge them a capital gains tax if they borrow against their assets that they haven’t paid capital gains tax on,” he mentioned throughout a latest episode. “Very simple. That can resolve this.”
Khosla framed the difficulty in broader financial phrases: In an AI-driven future the place labor turns into more and more automated the normal stability between labor and capital earnings will tilt dramatically towards capital.
“In this traditional battle of share of income to labor versus capital, it’ll shift a lot to capital, little to labor. How do you change that?” he requested. “Why should we favor people with capital, even though it increases economic growth in a world where growth isn’t in short supply? Capitalism was about efficiency, economic efficiency, but if the need for efficiency goes away because of extreme abundance, then why focus on efficiency? Let’s focus on equity.”
However his imaginative and prescient for structural tax reform extends effectively past state borders. “The current MAGA notion of ‘lower the taxes’ will not work,” Khosla warned, arguing that authorities coverage will decide whether or not AI-driven abundance creates a utopia or a dystopia.
“Policy, which will be driven by politics, will drive where we end up,” he mentioned. “I think it will start in the early 2030s—this massive drive for structural change.”
The irony stays sharp: California’s wealth tax could increase cash as soon as, however so long as billionaires can borrow towards property tax-free, the underlying structure of wealth preservation stays intact. Khosla’s staying put—and betting the actual battle will probably be fought in Washington, not Sacramento.
