Emil Barr argues that California's Proposition 40 billionaire tax may penalize founders who keep building their companies.

Barr notes that while wealth at the $100 million level changes personal consumption, wealth at the $2 billion level represents ownership and economic activity, such as stock and capital that generates paychecks for thousands of employees. Barr highlights that the tax could penalize founders who keep their equity in a market-leading company rather than cashing out early. He points out that the federal government already rewards holding small business stock through Section 1202 of the tax code. In contrast, California's proposed measure treats wealth that is tied to businesses still creating jobs the same as idle financial assets. Barr suggests that the state should recognize the contribution of founders who keep their companies headquartered in California and continue to reinvest in the same year the federal government expanded benefits for holding stock.