California wealth tax proposal deters Ohio startup founder from San Francisco move

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California wealth tax deters startups

Highlights

Proposition 40 on the Nov. 3 ballot would impose a one-time 5% tax on billionaires' accumulated wealth if they were California residents on Jan. 1, 2026.
Ohio-based startup founder Connor Barr canceled moving to San Francisco after reviewing Proposition 40 and citing concerns over California's tax and regulatory climate for entrepreneurs.
Prominent supporters, including six Nobel economists, back the measure for public service funding, while Governor Newsom and Sergey Brin oppose it, reflecting sharp stakeholder division.

Ballot measure sharpens relocation debate

As first reported by Fortune, Barr signed a lease about a year ago to move to San Francisco after being drawn by the city’s investor base and AI ecosystem, but later reversed the plan after reviewing California’s tax and regulatory landscape more closely.

Proposition 40, which is on the Nov. 3 ballot, would impose a one-time 5% tax on qualifying billionaires who were California residents on Jan. 1, 2026. The measure targets accumulated wealth rather than annual income, with most of the revenue intended for healthcare.

Barr, a 23-year-old founder based in Columbus, Ohio, says his concern is less about his immediate finances than about what he sees as broader political signaling toward entrepreneurs. While he says he is not certain he will keep building his business in Ohio, he adds that he is certain he would not build a business in California.

Flashpass develops technology for government agencies to connect people with work, including workers displaced by AI, Barr says. He moved to Columbus because Ohio became the first state to use the company’s software, and he had not decided whether Flashpass itself would relocate to California even as he considered moving there personally.

Supporters and opponents split on economic impact

Supporters of the measure argue the tax would help protect healthcare funding and sustain public services that underpin California’s economy. Six Nobel Prize-winning economists, including Joseph Stiglitz, Paul Krugman and Daron Acemoglu, backed the proposal in a September letter, saying the tax would be modest relative to billionaires’ wealth gains.

The debate reflects a broader tension for states trying to fund services that help businesses grow while retaining wealthy residents long enough to tax their gains. Barr says California still matters to his company because Flashpass has employees and investors in the state and he continues to travel there, even as he criticizes the policy direction.

Opposition to the proposal extends beyond startup founders. California Governor Gavin Newsom opposes the measure, and Google cofounder Sergey Brin has helped fund the campaign against it.

In our earlier coverage of affordability pressures across U.S. public finance, we outlined how higher living costs are straining household budgets and, in turn, tightening credit conditions for states, local governments, and utilities. We also noted that growing voter resistance to levy increases and limited ability to absorb higher fees are restricting revenue flexibility, widening the gap between spending needs and available funding.

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