Many billionaires are not sitting on piles of cash. Their wealth is tied up in stock they cannot easily sell without losing control of their companies.
Mark Cuban, the billionaire investor and Dallas Mavericks owner, is not having it. He lit into Khanna on X, calling the plan senseless and pointing out the obvious problem with lending someone money so they can hand it right back to you.
For those people, he suggested government loans backed by their shares, with terms he described as "long but not infinite." Khanna says most of the state's roughly 250 billionaires would not even need this option, since they have enough liquid assets, or cash they can actually access.
Cuban did not stop at calling the plan "insane." He called it "the biggest f - - - you in the history of entrepreneurship. Ever." He also warned that only "idiot startup founders" would stay in California if the tax passes, adding that he would tell startups to relocate before he would invest in them.
The wealth tax has divided the state's political establishment and pushed some billionaires to leave California entirely. It has also damaged Khanna's relationships with wealthy supporters he used to count on.
The California Democratic Party has endorsed it anyway.
The opposition is spending big. According to an Aug. 14 filing, Ripple co-founder Chris Larsen, a major Democratic donor, gave another $10 million to Building a Better California, a group formed mainly to fight the tax.
Khanna points to tech leaders like Jensen Huang of Nvidia, Lisa Su of Advanced Micro Devices, and Sundar Pichai of Alphabet as examples of executives he expects to stay put even if the measure passes. But other founders worry about a nasty surprise: the tax could be calculated using their super-voting shares, which give them decision-making power over their companies, instead of their true ownership stake. That could produce a tax bill much bigger than what they really own. Supporters of the measure reject that reading.
The fight is not just about California politics. It is a window into a bigger question that investors everywhere are watching: how do you tax wealth that is not actually cash?
Cuban, who lives in Dallas and has backed Kamala Harris, opposes the tax even though he is not personally subject to it. If the state lends a founder money to pay a tax, and the founder hands it right back, the state has not gained anything. And if founders feel targeted, they will take their companies, and their jobs, somewhere friendlier.
If a state pushes billionaires out, the companies they run might follow. That means jobs, innovation, and stock value could move with them.
The proposal has also raised real questions about enforcement. Would founders be forced to sell pieces of their businesses just to cover the bill? That is a risk for anyone holding shares in a company whose founder might have to dump stock to pay a tax.
For now, the fight is heading to voters. But the debate over how to tax the ultra-rich without breaking the businesses they built is not going away.