Mark Cuban’s Arguments Against The Proposed 5% CA Wealth Tax

Billionaire Mark Cuban and Rep. Ro Khanna recently clashed over California's Proposition 40, a proposed one-time 5% wealth tax on residents with over $1 billion in assets, aimed at funding healthcare and education. Cuban vehemently opposed it, arguing the tax would harm "cash poor, stock rich" startup founders, accelerate capital flight of existing businesses, and deter new companies from California. He also suggested the state has a spending problem, not a revenue one. Khanna countered that most billionaires' wealth is liquid public stock, and some wealthy individuals support the measure. Despite Khanna's points, economic analyses suggest Proposition 40 could ultimately result in a net loss of state tax revenue, fueling Cuban's concerns.

Late in the hours of August 15, X users were treated to a show that came in the form of a heated debate between two unlikely adversaries: billionaire investor and entrepreneur Mark Cuban and Representative Ro Khanna (D-CA). The debate centered around California’s Proposition 40, a proposed 5% wealth tax on the state’s billionaires. What began with Khanna touting a new coalition supporting the ballot measure quickly turned into a heated argument about issues like capital flight and asset liquidity. At one point, Cuban even told Khanna that he “doesn’t understand business”. Part of the reason why this exchange was unusual is that Mark Cuban is not represented by Khanna. Instead, Cuban seemed much more interested in speaking up for fellow entrepreneurs. Despite the escalations, Cuban raises many important concerns facing entrepreneurs both within California and beyond, particularly as Khanna continues to push for a nationwide wealth tax that is even more extreme than the one on the ballot this coming November.

Proposition 40 traces back to an October 2025 filing by St. John’s Community Health and SEIU-UHW. This proposition has since received enough signatures to qualify for the November 2026 ballot as a one-time, 5% tax on the net wealth of California residents with more than $1 billion in assets. 90% of the revenue raised from this one-time tax would go toward the state’s health care programs, with the remainder split between education and food assistance.

While there are plenty of reasons to support raising revenues from a small group of people to help pay for an important public expenditure, there has also been significant opposition to this ballot measure to the point that the probability of its passage is unclear.

Among the opposition are a key group of California billionaires who have already fled the state entirely in an effort to avoid paying this one-time tax. California billionaires have also contributed more than $100 million into campaigns to advertise the costs of this bill as well as back two rival measures (Propositions 41 and 42) that would nullify Proposition 40.

However, what might be the most compelling arguments against Proposition 40 come in the form of uncertainty as to how effective it might be in raising funds. Different from billionaires taking actions to prevent Proposition 40’s passage, the uncertainty in estimates comes from academics and point estimates that suggest that not only might Proposition 40 fail to raise $100 billion in incremental tax revenues, it could also potentially lead to a net loss in tax revenues.

Mark Cuban is a billionaire investor and entrepreneur. He is well known as being the former owner of the NBA’s Dallas Mavericks as well as being a “shark” on ABC’s hit show “Shark Tank”. Cuban has developed a reputation as being a prominent voice that favors business-first policies.

Ro Khanna represents California’s 17th congressional district, which includes Silicon Valley. He has emerged as a highly visible proponent of taxing billionaire wealth, including being a co-sponsor of a federal wealth tax bill (alongside Senator Bernie Sanders).

Cuban’s central point is that many newly minted billionaires are “cash poor, stock rich,” meaning their wealth exists on paper as private-company equity, not in a bank account.

Cuban posed the question to Khanna of how a founder is supposed to write a check for 5% of the wealth when there is not a market for the person to sell into. Khanna responded with the idea of letting billionaire founders take out a non-recourse loan to pay their taxes, which essentially would let billionaires borrow against their company ownership.

However, Cuban quickly noted the irony; progressives have long attacked billionaires for borrowing against stock instead of realizing taxable gains, yet the same mechanism is now being proposed as the tax’s own funding source.

Cuban highlighted that the tax gives California-based companies a financial incentive to relocate. While the estimated $100 billion in incremental tax revenues provided by supporters of Proposition 40 already factors in some tax avoidance due to capital flight, Cuban’s warning suggests that the estimates could be too low, a point echoed by other economists who are independent of Proposition 40’s sponsorship.

Cuban’s warning is less about theoretical exits of billionaires out of California and is more about underscoring the high-profile departures that have already taken place, like Sergey Brin, Larry Page, and Peter Thiel.

Beyond companies leaving, Cuban argued the tax would deter new startups and investment from ever landing in California in the first place. While this notion is similar to capital flight, it differs in the sense that numerous cities have become popular destinations for technology-based companies, like Austin, TX, Denver, CO, Nashville, TN, and Raleigh, NC.

If startups fear that this one-time transition tax might occur again in the future, they may favor another possible location over Silicon Valley. These startups can generate significant jobs, growth, and innovation. Cuban’s argument suggests that Proposition 40 could hurt Silicon Valley’s reputation as being the top location for tech startups within the U.S.

Underlying Cuban’s pushback is a broader argument that California’s fiscal problems should be solved through spending discipline rather than a new tax on wealth. Cuban highlighted how the state already has the highest income tax rate for individuals (13.3%) and among the highest income tax rates on corporations (8.8%).

Based on this, Cuban proposed a simple idea – the state is not undertaxing its citizens (and, in particular, its wealthy taxpayers and corporations). Instead, the state might have a spending problem that can be addressed to help finance healthcare and education.

Khanna’s counter is that most of the 250 billionaires targeted by Proposition 40 do not actually face Cuban’s liquidity problem — he cites figures suggesting roughly 72% of their collective wealth sits in public stock, not illiquid startup equity, meaning the government would simply collect from sellable assets in the vast majority of cases.

Khanna also points out that some of California’s wealthiest and most liquid billionaires, including Nvidia’s Jensen Huang, have voiced support for the measure, undercutting the idea that the ultra-wealthy are uniformly opposed. His point is that this is not something that all billionaires are opposed to, and some are even welcoming it.

Also, to Khanna’s points, capital flight cannot be perfectly measured, and advocates and adversaries can cherry-pick examples to point out when it is (or is not) pervasive.

Despite the points raised by Khanna, Cuban’s arguments remain valid. In fact, according to Stanford University – Hoover Institution" href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=6340778" rel="nofollow noopener" target="_blank">estimates from a team of economists from Stanford University – Hoover Institution, in modeling 100,000 scenarios of the implementation of the California Wealth Tax, California loses tax revenues in 71% of those scenarios. The average net present value of these scenarios is negative $24.7 billion. While this is just one set of analysis, it certainly sheds light on Cuban’s concerns about whether Proposition 40 might hurt Californians in the end.