Tech Investor Proposes Alternatives to California's Wealth Tax Debate

Jan 14, 2026, 2:48 AM

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The proposed wealth tax in California, aimed at billionaires, has ignited significant discussion within the tech sector. While some, like Nvidia CEO Jensen Huang, express support for the tax, others, including LinkedIn cofounder Reid Hoffman, have criticized it as detrimental to innovation. The proposal mandates that California residents with a net worth exceeding $1 billion pay a one-time tax of 5% on their assets, potentially raising $100 billion to offset federal health spending cuts.

In light of this contentious debate, tech investor David Friedberg has offered alternative strategies for raising revenue while addressing the loopholes that allow the ultra-wealthy to evade substantial tax payments. During a recent episode of the All-In podcast, Friedberg characterized the proposed wealth tax as akin to asset seizure, warning that it could set a precedent for similar measures in other states. He noted that many billionaires utilize a "buy, borrow, die" strategy, where they borrow against their assets to fund their lifestyles without incurring income taxes until their death.

Friedberg argues that a more straightforward solution would be to implement a capital gains tax on borrowed assets that have not yet been taxed. This approach would target the wealth accumulation strategies of billionaires more effectively than a wealth tax, which he believes could be renewed indefinitely and lead to further economic complications.

Another suggestion from Friedberg includes raising the capital gains tax, although he personally does not advocate for this measure. He believes that increasing capital gains taxes would function similarly to an income tax, thereby addressing the issue of tax avoidance among the wealthy.

The ongoing discussions among California billionaires about the wealth tax have also revealed other potential alternatives. Some have proposed allowing the government to receive illiquid stock as a low-interest loan for a set period, or taxing publicly traded stock. However, opponents of the wealth tax warn that it could hinder economic growth and innovation, particularly in the tech sector.

The proposal has divided California's Democratic lawmakers, with Governor Gavin Newsom opposing it while US Representative Ro Khanna supports it, albeit with reservations about its current language. Newsom has been actively working against the proposal, emphasizing the need for revisions to avoid taxing illiquid stakes or voting shares.

As the debate continues, the implications of the wealth tax on California's economy and its tech industry remain a focal point. Critics, including Y Combinator CEO Garry Tan, have raised concerns about how the tax could misrepresent ownership stakes, potentially leading to inflated tax liabilities for founders.

In summary, while the proposed wealth tax aims to address wealth inequality, the discussions surrounding it have opened the door for alternative revenue-raising strategies that could more effectively target the financial practices of the ultra-wealthy. Friedberg's insights highlight the complexities of tax policy and the need for innovative solutions in addressing economic disparities.

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