Brin’s political push reflects a broader awakening among California’s ultrawealthy. Over the past six months, the proposed billionaire tax and a heated governor’s race have drawn tech titans and business leaders more directly into the state’s affairs — a space many of them have traditionally kept at arm’s length.
Prior to this year, Brin’s last contribution in a California election cycle was 2010 when Arnold Schwarzenegger was governor and the Google co-founder largely backed climate causes. He’s now spent more than $58 million in the last four months, including an extra $9 million disclosed late Friday, but more importantly has helped mobilize a network of fellow tech titans in a push to sway state issues.
“The wealth tax was a wake up call, it was a fire that just lit up Silicon Valley literally in a matter of weeks,” said Steven Maviglio, a veteran Democratic strategist. “I’ve never seen anything like it.”
Altogether, ultrawealthy donors have injected more than $270 million into California’s political scene in this election cycle. Outside of the wealth tax, billionaire Tom Steyer is emerging as a top Democratic candidate for governor after the downfall of former Representative Eric Swalwell following allegations of sexual assault. Steyer, a former hedge fund manager, has spent more than $140 million in his election bid, crowding TV airwaves with ads and labeling himself a “class traitor” with a campaign modeled after Vermont Senator Bernie Sanders.
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Ballots for the June 2 primary election start going out next week. Brin and a cohort of the ultrawealthy including Coinbase CEO Brian Armstrong and venture capitalists Vinod Khosla and John Doerr have plowed millions into supporting Matt Mahan, a Silicon Valley mayor, with a back-to-basics agenda and a penchant for taking on the state’s Democratic establishment.
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That money has helped Mahan buy airtime and attracted controversy, but his polling numbers remain stuck in the single digits while Steyer’s well-funded progressive campaign is gaining favor with voters. Brin has also backed Republican Steve Hilton, who’s currently leading polls.
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“You have two polar opposites going on. You have a billionaire running who has actually fully adopted an agenda that the vast majority of voters agree with: Taxing billionaires, funding healthcare, fighting back against ICE,” said Lorena Gonzalez, head of the state’s largest union group, the California Federation of Labor Unions. “And then you have billionaires pushing a candidate whose talking points are apologetic to the tech industry.”
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In California, Brin’s newfound political action was catalyzed by the wealth tax proposal, which would levy a one-time 5% tax on billionaires to help offset federal health-care cuts. In a Signal group chat earlier this year with other Silicon Valley elite, Brin floated the idea of raising hundreds of millions of dollars to influence California politics, according to a person who saw the message.
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Shortly after leaving California, Brin contributed $20 million to a new group dedicated to fighting the tax and pushing pro-business policies, Building a Better California, making him the single largest contributor. He gave it another $37 million over the spring, as the group quickly started supporting a trio of anti-wealth tax measures that could nullify a billionaire tax if it gets passed in an election.
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Joining Brin in the effort were other billionaires, including former Google CEO Eric Schmidt, Stripe CEO Patrick Collison and venture capitalist Michael Moritz. Peter Thiel, who also left California ahead of the New Year’s Day deadline, gave $3 million to a separate committee opposing the wealth tax.
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Many in Sacramento are skeptical that Brin and his fellow ultra-rich will succeed in swaying California state politics. They point to the failed candidacy of former eBay executive Meg Whitman, who spent around $144 million of her own fortune to become governor, or even venture capitalist Tim Draper’s longshot initiative to split California into six separate states.
I wonder if they even think about the fact that they are willing to spend hundreds of millions to get something that's good for them and bad for everyone else.
I wonder if they even think about the fact that they are willing to spend hundreds of millions to get something that's good for them and bad for everyone else.
That's probably an element of it, but I'd guess that what really catalyzed opposition among tech founders was that the tax is poorly designed from a technical perspective. Later in the article...
That's probably an element of it, but I'd guess that what really catalyzed opposition among tech founders was that the tax is poorly designed from a technical perspective.
It is possible that the California Franchise Tax Board (FTB), charged with administering the new tax, would determine that [class B shares] are publicly tradable because they have an ascertainable value and can be converted into tradeable Class A shares under a dual-class structure. In that case, they would be taxed by their market value.
Of considerable concern for founders, though, is the very real possibility that they would not be considered publicly traded assets, in which case the proposed wealth tax would apply to founders’ and early investors’ share of voting rights, even if they are not at all representative of their actual economic stake in the company. This could force founders to convert their Class B shares to Class A and sell them as common stock, surrendering their controlling stakes and liquidating large portions of their investment.[4]
Two billionaires represent opposite extremes: Tony Xu, the founder of DoorDash, owns 2.6 percent of his company but controls 57.6 percent of the vote, yielding wealth tax liability of $2.62 billion on an ownership interest worth $2.41 billion. Since selling his shares incurs capital gains tax, moreover, and the entire value of these shares is capital gains for him, his total tax liability for his DoorDash shares would be $4.17 billion—173 percent of their value. The tax would bankrupt him absent an FTB determination to set aside this valuation. (Xu’s valuation is so clearly incorrect that he would almost certainly prevail on this point. Others may have less success.)
Conversely, Jensen Huang of NVIDIA is the rare founder without preferred voting shares. His 3.8 percent stake in NVIDIA gives him 3.8 percent of the vote, yielding wealth tax liability of $8.5 billion on an ownership interest worth $170 billion...
Founders could challenge the voting rights assumption, arguing that substituting their economic stake plus some control premium is necessary to avoid a substantial overstatement of liability,[5] but since drafters gave priority to voting rights with a clear understanding that they often dramatically outstrip actual ownership stakes, the FTB and the courts might be loath to permit alternative valuations in all but the most extreme cases. Furthermore, as discussed later, proposing an alternative through the submission of a certified appraisal carries its own risks.
Later in the article there's a table showing that if the tax is implemented as described, Sergey Brin (as above) could have 50B in tax liability under the wealth tax, plus more in capital gains from being forced to liquidate shares. Together that would be well over a third of his total net worth. Undoubtedly some will jump in to argue that this is reasonable since he'll still be a billionaire, every billionaire is a policy failure, etc. Very well. But the point is that it's a tactical error: it is extremely obvious that effective tax rates of 37% will catalyze strong opposition and lead to negative follow-on effects in a way that a 5% tax wouldn't, which is exactly what we're seeing right now.
https://archive.ph/E0cMc
From the article:
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I wonder if they even think about the fact that they are willing to spend hundreds of millions to get something that's good for them and bad for everyone else.
That's probably an element of it, but I'd guess that what really catalyzed opposition among tech founders was that the tax is poorly designed from a technical perspective.
Later in the article there's a table showing that if the tax is implemented as described, Sergey Brin (as above) could have 50B in tax liability under the wealth tax, plus more in capital gains from being forced to liquidate shares. Together that would be well over a third of his total net worth. Undoubtedly some will jump in to argue that this is reasonable since he'll still be a billionaire, every billionaire is a policy failure, etc. Very well. But the point is that it's a tactical error: it is extremely obvious that effective tax rates of 37% will catalyze strong opposition and lead to negative follow-on effects in a way that a 5% tax wouldn't, which is exactly what we're seeing right now.