The numbers come first. Proposition 40, a California ballot measure scheduled for a November vote, would impose a one-time tax of up to 5% on the covered assets of individuals and trusts worth more than $1 billion. Rep. Ro Khanna, who co-sponsored the measure alongside Bernie Sanders and the California Labor Movement, says it targets roughly 250 California billionaires and would protect health care for 'millions of working-class and middle-class Californians.'
Mark Cuban disagrees — loudly.
In a seven-part public exchange on X over the weekend, Cuban tore into Khanna's proposal and drew a line in the sand for his own capital. 'If this passes, only idiot startup founders stay in Cali,' Cuban wrote. 'I've done it before and will do it again. Dallas. Pittsburgh. Indiana. I will make NOT being in California a prerequisite for an investment.'
The core of Cuban's argument is structural, not ideological. Many startup founders, he explained, are 'cash poor, stock rich' — their net worth exists on paper through company valuations, not in liquid accounts. 'A unique feature of these 10b startups is that even if they raise a billion, little, if any of that money goes to the founders, who are now worth billions of dollars overnight,' Cuban wrote. Forcing those founders to pay a tax on unrealized gains, he argued, would compel them to borrow against shares, sell stakes, or simply relocate before the tax takes effect.
California's own Legislative Analyst's Office has noted that billionaire wealth typically consists of stocks, businesses, and other investments rather than cash — a structural reality that makes a wealth tax fundamentally different from an income tax.
Khanna offered a workaround: founders could pledge their shares to the state and receive a government loan to cover the tax bill. The loan would be nonrecourse — meaning the founder bears no personal liability if the company fails — and could run up to 10 years. At the end of that period, the founder repays in cash or the state assumes the pledged shares.
Cuban was unimpressed. The arrangement, he pointed out, would essentially have California lending money to founders so they can immediately hand it back to the state. And if the company fails and the loan goes unpaid, Sacramento becomes a shareholder in a private startup. 'I'm sure the investors in those companies will be thrilled about their new partners,' Cuban wrote, with evident sarcasm.
The exchange exposed a genuine fracture inside the Democratic coalition. Cuban has been a high-profile Democratic surrogate — he campaigned for Kamala Harris in 2024 and endorsed Hillary Clinton in 2016 — yet he describes himself as 'libertarian at heart' and has consistently opposed taxes on unrealized gains. His willingness to publicly break with a sitting Democratic congressman over capital formation is a signal the party's tech-aligned donor class cannot be taken for granted.
The market has already voted on California's business climate. The state has watched a steady outflow of founders, funds, and headquarters over the past decade. Prop 40 would accelerate that dynamic by attaching a government lien — potentially state equity — to the most valuable private companies still headquartered there. Free enterprise runs on clear rules and predictable costs; a tax that turns Sacramento into an involuntary venture partner is neither. Cuban's threat to redirect capital elsewhere is not a bluff — it is the rational response of any investor who understands that capital, unlike voters, has no obligation to stay.
