U.S. Representative Ro Khanna (D-CA) has endorsed a proposed tax on extreme wealth in California, which aims to impose a one-time 5% tax on individuals with net worths exceeding $1 billion. This initiative seeks to recover approximately $90 billion in Medicaid funding that was reduced under recent federal budget legislation. Advocates, including the Service Employees International Union–United Healthcare Workers West, are currently gathering signatures to place this measure on the ballot for the 2026 election. The tax would impact around 200 billionaires, who would have a five-year period to fulfill their tax obligations.

While the proposal has significant backing among the general public, it has faced backlash from some of California's wealthiest residents, including venture capitalist Peter Thiel and Google co-founder Larry Page. Both have suggested they may reduce their ties to California in response to the tax, a common reaction among affluent individuals facing tax increases, although historical data indicates such threats are often not realized.

Palmer Luckey, co-founder of defense technology company Anduril Industries, criticized the initiative on social media, claiming it could force entrepreneurs to liquidate substantial portions of their companies to meet tax obligations. He described the proposal as a product of "fraud, waste, and political favors."

If approved by voters, the tax would be retroactive to January 1, 2026, meaning a resident with $20 billion in assets would owe $1 billion, payable over five years. Bill Ackman, another billionaire investor, warned that California could face severe economic repercussions if the measure proceeds, suggesting it could drive away productive entrepreneurs and reduce tax revenues.

Khanna, a member of the House's progressive faction, has engaged in disputes with industry leaders regarding their positions on taxation and labor rights. He has expressed skepticism about the likelihood of billionaire flight, referencing former President Franklin D. Roosevelt's remarks on economic elites. Despite criticism from former donors who argue that his stance alienates moderate constituents, Khanna maintains that addressing wealth concentration is crucial for fostering a thriving democracy and ensuring equitable access to essential services like healthcare and education.

California Governor Gavin Newsom has publicly opposed the billionaire tax, acknowledging the broader issues of wealth inequality that the proposal highlights. He emphasized the need for a balanced discussion regarding the implications of such measures on the state's economy and social fabric.