California entrepreneur Eric Schiffer warned that the state’s proposed billionaire wealth tax could drive some of its most successful business leaders out of California, predicting a “giant sucking sound” of entrepreneurs heading for the exits if voters approve the measure.
Schiffer, chairman of family office Patriarch and CEO of Reputation Management Consultants, told FOX Business that he works with several billionaire clients, including some in California, and said many are unhappy about the proposal.
“I think the impact of this passing in California is a giant sucking sound of all of these entrepreneurs being sucked out of California because they’re just not going to want to stay,” Schiffer said.
“Why would anyone stay if they have spent their life building wealth that they were already taxed on?” he continued.
“You’re going to see some of the most brilliant, most successful men and women that have been the cornerstone of tax revenue and donational revenue and leading companies that are employing fleets of individuals and scores of individuals, they’re going to say, ‘No mas, I’m out. Goodbye,’ because they don’t feel respected or appreciated and they feel under attack,” Schiffer said.
Proposition 40, which is on the Nov. 3 ballot in California, would impose a one-time tax equal to 5% of net worth on billionaires who were California residents on Jan. 1, 2026.
The tax would be due in 2027, although payments could be spread over five years at an additional cost. Real estate, pensions and retirement accounts generally would be excluded from the tax.
The measure has been endorsed by the California Democratic Party, while some notable leaders, including Gov. Gavin Newsom, have expressed opposition.
California Republican gubernatorial candidate Steve Hilton has also warned that the billionaire tax would further strain the state’s economy.
Schiffer argued that the tax could also affect Californians without billion-dollar fortunes, saying the consequences could reach their workplaces and economic opportunities.
“I think some of the consequences, if you’re a working individual in California, is there’s going to be less opportunity,” Schiffer said.
He argued that if entrepreneurs relocate, the state could lose businesses, jobs, investment and tax revenue.
“If you think California, when you have all these billionaires bolt, isn’t gonna hurt and isn’t going to create problems and isn’t going to reduce tax revenue and reduce jobs, boy, you’re smoking some of the stuff that they’re selling in California in some of these stores,” he said.
Schiffer also argued that the state could eventually seek to impose similar taxes on people with smaller fortunes.
“If they’re going after billionaires, then the next thing is they’re going after you if you’re worth hundreds of millions of dollars,” he said.
California’s nonpartisan Legislative Analyst’s Office said “some billionaires” may decide to leave the state in response to the tax, taking with them the income tax revenue they currently generate.
The LAO estimates those and other behavioral responses could reduce state income tax revenue by less than $1 billion per year. At the same time, it estimates the wealth tax would temporarily generate tens of billions of dollars over several years.
FOX Business asked Schiffer directly whether he would leave California if the policy eventually expanded beyond billionaires.
“If it got to the point where they’re talking about people that may be worth more than a couple hundred million dollars in that range, California, unfortunately, would be in my rearview mirror,” Schiffer said.
Billionaire Mark Cuban has separately argued that billionaire founders can be “cash poor, stock rich” because much of their net worth can consist of company shares rather than cash available to pay a wealth tax.
Schiffer made a similar point, saying some billionaires hold much of their wealth in stock, including shares of private companies.
Rep. Ro Khanna, D-Calif., one of the proponents of the wealth tax, has previously argued that the levy would help preserve health care for working-class Californians. He also said the “Sacramento establishment” and lobbyists opposing the measure were “blatantly out of touch.”
Schiffer argued that the larger question is what the proposal tells people trying to build companies and accumulate wealth in California.
“You’re changing the contract that America has sent to entrepreneurs,” he said. “And you’re saying, this isn’t a good place to do business.”
“What we don’t want to ever do is to lose the immense power and immense creative engines that the greatest entrepreneurs in the world continue to generate on behalf of the United States of America,” Schiffer added.