FOX Business contributor Josh Schafer discusses the California Democratic Party’s support for a billionaire tax and raises questions about income on ‘The Big Money Show.’ Mark Cuban told Rep. Ro Khanna, D-Calif., that he “doesn’t understand business” during a heated showdown over California’s proposed 5% billionaire wealth tax, warning that it could drive startup founders and investors out of the state. The exchange focused on California’s Proposition 40, a controversial ballot measure that would impose a one-time 5% wealth tax on residents with more than $1 billion in assets. The measure has been backed by the California Democratic Party, while some notable leaders, including Governor Gavin Newsom, have expressed opposition. In a video posted to X on Saturday, Khanna defended the tax, arguing that it would help preserve health care for working-class Californians. He said the “Sacramento establishment” and lobbyists opposing the measure were “blatantly out of touch.” STEVE HILTON WARNS CALIFORNIA’S ECONOMY WILL ‘ABSOLUTELY CRASH’ UNDER ‘INSANE’ MILLIONAIRE TAX Mark Cuban, left, and Rep. Ro Khanna, D-Calif., clashed on social media over California’s proposed 5% wealth tax on billionaires. (Leah Millis/Reuters; Nathan Laine/Bloomberg via Getty Images/Getty Images) Cuban responded by arguing that founders of rapidly appreciating startups can become billionaires on paper without having hundreds of millions of dollars in liquid assets available to pay the proposed tax. “They are the definition of cash poor, stock rich,” Cuban wrote in X. He warned that the move could cause startup founders and investors to flee California. “If this passes, only idiotic startup founders will stay in Cali,” Cuban wrote. WARNING NEW HOCHUL AND MAMDANI PIED-À-TERRE TAX COULD ACCELERATE WEALTH EXODUS IN NEW YORK CITY Billionaire investor Mark Cuban warned that California’s proposed 5% wealth tax could drive startup founders and investors out of the state. (Christian Petersen/Getty Images/Getty Images)Cuban went further and warned that the measure could also influence where he invests. “I will make NOT being in California a prerequisite for an investment,” he continued. “Ideology is not a strategy,” he added. Khanna then proposed an alternative solution for founders whose wealth is largely tied up in shares of private companies. “Why not a non-recourse loan for pledged shares as collateral for this situation?” Khanna wrote. KEN GRIFFIN’S NYC SKYSCRAPER MOVES FORWARD DESPITE Clash with MAYOR ZOHRAN MAMDANI Rep. Ro Khanna, D-Calif., championed a proposed flat 5% wealth tax for California residents with more than $1 billion in assets. (Win McNamee/Getty Images) Khanna proposed addressing concerns surrounding illiquid founders by allowing them to pledge shares in their companies as collateral for a government loan that could then be used to pay the estate tax. The loan could remain outstanding for about 10 years, after which the founder would pay the government in cash or the government would take possession of the pledged shares. Because the loan would be non-recourse, the founder would not be personally liable if the company failed. Cuban criticized the proposal. “That’s crazy,” he wrote. Cuban argued that California would effectively loan the founders money that would immediately be returned to the state as payment for the tax, meaning the deal would not initially generate additional cash revenue from those taxpayers. “What’s the point of that?” wrote.BOB IGER, JOSH KUSHNER SHOCKINGLY BUY LAKERS MONTHS AFTER MARK WALTER BECAME MAJORITY OWNER California Governor Gavin Newsom has expressed opposition to the proposed one-time wealth tax on the state’s billionaires. (Brandon Bell/Getty Images/Getty Images)Cuban also argued that California could end up owning shares in private companies if the founders couldn’t repay the loans. “Cali, you take it. We’ll take it!” “The government would still collect from the vast majority of billionaires who are not illiquid,” Khanna wrote. Claiming that 72% of billionaires’ wealth is held in public equities, Khanna said the proposed financing mechanism would target real “paper billionaires” whose fortunes are tied up in illiquid assets. He argued that if a private company succeeds, California would ultimately collect on the loan, while the founders would not be personally responsible if the company failed. (Tim Heitman/Getty Images/Getty Images) Khanna then expanded on his argument, telling Cuban that ordinary Americans support higher taxes on billionaires. “Mark, come with me on a road trip through California, Pennsylvania and the country and ask everyday Americans how they feel about a tax on billionaires,” Khanna wrote. “The majority say, I promise you, why only 5 percent?” Cuban responded, “You don’t understand business, Ro.” He argued that even a successful founder could spend 10 years growing a company, creating thousands of jobs and paying hundreds of millions of dollars in federal and state taxes without even having $250 million in liquid assets available to repay the proposed state loan. The tax would help protect health care for working-class and middle-class residents. (Tom Williams/CQ-Roll Call, Inc via Getty Images/Getty Images) “Is that what you want your state to be?” Cuban wrote. Khanna continued to respond, arguing that most of the approximately 250 California billionaires who could be affected by the tax do not face the liquidity problem Cuban described. Cuban responded with his harshest criticism yet, arguing that forcing startup founders to sell stock to satisfy the tax would punish entrepreneurs who reinvest their wealth into growing their companies, creating jobs and paying employees instead of cashing in for themselves. “Ro, this is the biggest bullshit in the history of entrepreneurship. Ever,” Cuban wrote.
