California’s hatred for capitalism is killing the goose that laid its golden egg

New California wealth tax proposal could force billionaires to sell private companies early, potentially cutting jobs and driving innovation out of the state.

If you force someone to sell public stock, the markets can absorb it. But when you force the sale of private company stock, you’re often forcing a founder to sell part of their business or all of it earlier than planned.  Ted Jenkin is president of Exit Stage Left Advisors and partner at Exit Wealth.

Under the plan, California would impose a one-time tax on residents with net worths over $1 billion, targeting "wealth" rather than income. That includes unrealized gains which means stock ownership, private company equity and illiquid assets that exist on paper. Wealth isn’t always in checking accounts. Supporters call it fairness, but it’s a tax on success before success is ever realized. 

Here’s the part most politicians ignore. Billionaires don’t necessarily sit on piles of cash. Their wealth is overwhelmingly tied up in businesses, real estate stock holdings and their private companies. When the government demands a massive check based on paper valuations, the only way to pay it is to sell assets.