In early 2026, Reid Hoffman, billionaire co-founder of LinkedIn and one of the Democratic Party’s most influential donors, publicly criticized California’s proposed wealth tax, calling it “badly designed” and “horrendous” for innovation. Hoffman’s remarks have drawn widespread attention because they break from his usual alignment with progressive economic policies and place him alongside a growing number of Silicon Valley leaders warning that aggressive taxation is pushing wealth and talent out of the state.
California lawmakers have floated proposals that would tax unrealized capital gains, meaning increases in the value of assets like stock before they are sold. While supporters argue the measure would address inequality, Hoffman says the plan risks undermining the very ecosystem that made California the global hub of technology innovation.
Hoffman’s Core Objections to the Wealth Tax
In a recent discussion with Representative Ro Khanna, Hoffman outlined what he described as “massive flaws” in the proposal. His strongest objection centers on taxing illiquid stock. Many tech founders hold most of their wealth in company shares that cannot easily be sold without losing control or harming the business. Hoffman argues that forcing founders to sell shares simply to pay taxes disrupts governance, discourages long-term thinking, and penalizes company builders before value is realized.
Hoffman also warned that the tax would act as an innovation killer. Silicon Valley thrives on patient capital and risk-taking, and policies that penalize unrealized growth could make California less attractive to the next generation of entrepreneurs. According to Hoffman, the state risks losing its “generativity” the ability to continuously create new companies and industries.
Another major concern is capital flight. Hoffman emphasized that poorly designed taxes often encourage avoidance rather than compliance. As wealthy individuals shift their legal residency to lower-tax states, California could end up collecting less revenue overall.
The “Billionaire Exodus” Debate
Critics of the wealth tax point to several high-profile departures as evidence of a growing billionaire exodus. Elon Musk moved Tesla’s headquarters to Texas, citing high taxes and regulation. Palantir co-founder Joe Lonsdale also relocated to Texas, while Oracle founder Larry Ellison established residency in Florida and Hawaii. Opponents argue these moves illustrate how aggressive taxation can erode California’s tax base.
Supporters Push Back
Proponents of the tax, including economist Gabriel Zucman, counter that billionaires often pay lower effective tax rates than middle-class workers because their wealth is tied to stock appreciation rather than income. Supporters argue a minimum wealth tax is necessary to address inequality and ensure the ultra-wealthy contribute more to public services.
As the debate continues, Hoffman’s criticism highlights a growing rift within Democratic-aligned tech leaders. The outcome could shape not only California’s tax policy, but also the future of innovation in Silicon Valley.
