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Big Tech Opposes California's Billionaire Tax While Remaining Deeply Dependent on Public Funding

The author of 'Cyberselfish' argues that Silicon Valley's foundational capital came from government investment — and that its wealthiest figures are now lobbying against the taxes that made them possible.

Written by Graham Vale · Bureau Finance · Jun 1, 2026

The Tax California Is Considering

California legislators have advanced proposals to tax unrealized capital gains — that is, increases in asset value that have not yet been converted into cash through a sale — held by individuals with net worth above a defined threshold. The precise mechanics vary by proposal, but the target population is narrow and wealthy: a few thousand individuals, many of them concentrated in the technology sector.

Unrealized gains taxation is a significant departure from the conventional income tax framework, which taxes wealth only when it is realized through a transaction. Proponents argue the current system allows billionaires to accumulate enormous paper wealth while paying relatively modest income tax. Opponents argue that taxing gains before they are liquid creates valuation problems and may force asset sales.

Silicon Valley's Objections

Opposition from the technology industry has been vocal and, in some cases, financially organized. The arguments cluster around a few themes: that the tax is technically difficult to administer, that it will drive wealthy residents to lower-tax states, and that it penalizes entrepreneurial risk-taking.

These are not frivolous objections. Valuing illiquid assets — private company equity, for instance — for tax purposes is genuinely complex. And California has documented outmigration of high-income residents to Nevada, Texas, and Florida, states with no personal income tax.

But the intensity of the opposition, and the political resources deployed against the proposal, have drawn scrutiny from those who argue the framing obscures a more fundamental question.

The Public Investment Argument

Paulina Borsook, whose 1995 essay and 2000 book 'Cyberselfish' examined libertarian ideology in Silicon Valley, has renewed her argument that the technology sector's foundational capital was not private. DARPA — the Defense Advanced Research Projects Agency — funded the research that produced the internet's precursor networks. Federal grants supported the university laboratories where semiconductor and software research matured. The National Science Foundation funded early internet infrastructure. Public land-grant universities educated the engineers who built the industry.

Borsook's argument is not that government deserves ongoing credit for private innovation, but that the ideological posture of the sector — which frequently frames taxation as confiscation and government as obstacle — is historically illiterate about its own origins.

This is a structural critique, not a sentimental one. The question it raises is whether the fiscal relationship between the technology sector and the public institutions that enabled it has been adequately balanced.

What the Balance Sheet Actually Shows

California's budget situation gives the debate concrete stakes. The state has faced recurring structural deficits, driven by a combination of volatile income tax revenue — heavily dependent on capital gains realizations, which fluctuate with market conditions — and growing expenditure obligations in healthcare, housing, and infrastructure.

A tax on unrealized gains would, in theory, smooth some of that volatility by capturing wealth accumulation independent of market timing. Whether it would do so in practice depends heavily on design, enforcement, and the behavioral responses of affected taxpayers.

The technology sector's concentration in California means that any significant wealth tax falls disproportionately on that industry. That is partly a function of geography and partly a function of the extraordinary concentration of wealth that has accumulated in a small number of technology companies over the past two decades.

The Ladder Argument

Borsook's framing — that Silicon Valley's elite want to 'pull up the ladder' — is pointed, but it maps onto a recognizable pattern in fiscal policy debates. Industries that benefited from public investment during their formation frequently become opponents of the taxation that funds equivalent investment for subsequent generations.

This is not unique to technology. Financial services firms that received federal support during the 2008 crisis subsequently lobbied against regulatory and tax measures framed as responses to that crisis. The pattern is consistent enough to be analytically useful, even if it does not resolve the specific policy questions.

What it does suggest is that the debate over California's billionaire tax is not simply a technical argument about tax design. It is also an argument about the terms of the relationship between private wealth and public institutions — and about who gets to define those terms.

Key takeaways

California's proposed billionaire tax targets unrealized capital gains held by ultra-high-net-worth individuals — a category heavily populated by technology founders and early investors.
Critics of the tax, including prominent Silicon Valley figures, argue it is economically distortive and may accelerate wealth and domicile flight from California.
Paulina Borsook, whose 1995 essay and subsequent book 'Cyberselfish' critiqued libertarian ideology in tech culture, contends that Silicon Valley's foundational growth was underwritten by DARPA, federal research grants, and public university systems.
The contradiction — opposing public taxation while benefiting from public investment — is not new to the sector, but the scale of current tech wealth makes the policy stakes considerably higher.
California faces a structural budget deficit, giving the billionaire tax proposal fiscal urgency beyond ideological framing.

FAQ

What is California's proposed billionaire tax?

California legislators have proposed taxing unrealized capital gains — increases in asset value that have not been converted to cash through a sale — held by individuals above a high net worth threshold. The exact structure varies by proposal, but the target population is primarily ultra-high-net-worth individuals, many of them in the technology sector.

What does 'unrealized capital gains' mean?

An unrealized capital gain is the increase in value of an asset — such as stock or real estate — that the owner has not yet sold. Under current federal and California tax law, gains are generally taxed only when realized through a sale. Taxing unrealized gains would represent a significant structural change to that framework.

Who is Paulina Borsook and what is 'Cyberselfish'?

'Cyberselfish' began as a 1995 essay and was expanded into a book published in 2000. Borsook, a technology journalist, argued that Silicon Valley had developed a libertarian ideology that was at odds with the public institutions — federal research agencies, public universities, government contracts — that had actually funded the sector's foundational development.

What role did government funding play in building Silicon Valley?

DARPA funded the ARPANET, the precursor to the internet. The National Science Foundation funded early internet infrastructure. Federal research grants supported university laboratories where semiconductor and software technologies were developed. Public land-grant universities educated much of the engineering workforce. These are documented historical facts, not contested claims.

What are the main arguments against the billionaire tax?

Opponents argue that taxing unrealized gains creates valuation difficulties for illiquid assets such as private company equity, may force asset sales to meet tax obligations, and could accelerate the outmigration of wealthy residents to states with lower tax burdens. These are substantive technical and behavioral concerns, though their magnitude is disputed.

Why does California's budget situation matter here?

California's income tax revenue is heavily dependent on capital gains realizations, which fluctuate significantly with market conditions. This creates structural budget volatility. A tax on unrealized gains could, in theory, provide more stable revenue, though the behavioral and administrative challenges of such a tax are significant.

Citations

Big Tech hates California's billionaire tax — but loves taxpayers' moneyAuthor of 'Cyberselfish' argues Silicon Valley was built on government dollars and its elite now want to pull up the ladder
MarketWatch Top Stories RSS FeedBureau research source: MarketWatch Top Stories
Cyberselfish: A Critical Romp Through the Terribly Libertarian Culture of High Tech — Paulina BorsookBorsook's 2000 book argued that Silicon Valley's libertarian ideology was historically inconsistent with its dependence on public funding