Billionaire investor Mark Cuban publicly rebuked Rep. Ro Khanna over California's proposed one-time 5% tax on billionaires, warning he will require startups he funds to leave the state if the measure passes.
Cuban took to X on August 15 to challenge Khanna, a Democratic congressman and potential 2028 presidential contender, after Khanna celebrated the California Democratic Party's endorsement of Proposition 40. The exchange laid bare a fault line running through the Democratic coalition, between progressives who see the tax as a populist victory and business-minded allies who say it will gut the state's startup economy.
Khanna had framed the endorsement as a stand for ordinary Californians. "California voters want a Democratic Party that will stand up for the working class over the billionaire class," he posted. Cuban's reply was pointed but personal in tone, as the New York Post reported.
"Ro, I like you. You know that. But you need to read the state of the state."
From there, Cuban dismantled the premise behind Prop 40 with an argument rooted in how startup wealth actually works.
Cuban's core objection is mechanical, not ideological. California's tech corridor is producing a growing number of so-called "deca unicorns", startups valued at $10 billion or more, as investors pour money into artificial intelligence and other high-growth sectors. But the founders behind those companies hold most of their wealth in illiquid stock, not bank accounts.
"They are the definition of cash poor, stock rich," Cuban wrote.
He pressed Khanna directly on the math. A founder worth a billion dollars on paper would owe $50 million under the proposed 5% levy. For a company with multiple co-founders, the combined hit multiplies fast, and the cash to cover it simply does not exist in most cases.
"Do you really think each of multiple founders, who started an amazing company in Cali and is now a billionaire, can each just pull out $250m per billion of net worth from their raise? You know they can't."
That question went to the heart of the policy's design flaw. Proposition 40 taxes net worth, but net worth built on startup equity is not the same as net worth sitting in a brokerage account. Forcing founders to liquidate stock, or borrow against it, to satisfy a state tax bill creates pressure to move operations somewhere that does not impose the cost.
Cuban made that threat explicit.
"You can bet if I'm investing in a multi-billion dollar startup, I'm asking them to move from California first."
He went further: "If this passes, only idiot startup founders stay in Cali."
Cuban is not the only prominent figure sounding alarms. Gov. Gavin Newsom, no conservative, has opposed Prop 40 on the grounds that it will damage California's economy. The California Democratic Party endorsed the measure anyway, breaking with Newsom and other mainstream Democrats who worry the tax will accelerate the state's ongoing business exodus.
Khanna publicly clashed with Newsom over the issue earlier in August, positioning himself as the populist alternative within the party. Labor groups have backed Prop 40 as a way to offset federal health cuts, though the specific organizations involved have not been publicly identified in detail.
On the other side, billionaire Sergey Brin has poured money into competing ballot initiatives designed to override Prop 40. Under California's ballot rules, when competing measures both pass, the one receiving more votes takes effect, setting up a direct spending war between tech wealth and progressive organizers heading into November.
Polling shows the race is tight. A recent survey found 48% of Californians support Prop 40, 41% oppose it, and roughly 11% remain undecided. That narrow margin means the outcome likely hinges on whether undecided voters buy the populist framing or the economic warning.
Khanna's argument is built on a clean political contrast: billionaires versus working people. It polls well. It fits on a bumper sticker. And it sidesteps the question Cuban raised, what happens when the billionaires in question are founders whose wealth exists on spreadsheets, not in vaults.
Cuban did not dispute that billionaires should contribute. He disputed the mechanism. A one-time 5% tax on net worth treats paper gains as accessible income, which they are not for most startup founders still building their companies. The practical result, Cuban argued, is not redistribution, it is relocation.
That distinction matters for California's tax base. The state already depends heavily on high earners for revenue. If founders and investors begin routing new ventures through Texas, Florida, or other states without wealth taxes, the lost economic activity could dwarf whatever Prop 40 collects in its single levy.
Khanna replied to Cuban's thread with a question about alternative methods to tax billionaire startup founders, but the specifics of his counterproposal were not detailed in the exchange.
Cuban's broadside carries weight precisely because he is not a Republican culture warrior. He supported Democrats in recent cycles and has built credibility in Silicon Valley as a pragmatic investor. When he tells a Democratic congressman that the party's tax plan will chase jobs and capital out of the state, the critique lands differently than it would from a partisan opponent.
California's voters will decide in November whether Prop 40 or a competing measure prevails. The policy question is straightforward: can you tax wealth that exists only on paper without driving the people who create it somewhere else?
Cuban already gave his answer. He is not waiting for the vote, he is telling founders to pack now.
