California's tech scene might be facing an existential threat, at least according to Garry Tan. The CEO of Y Combinator, the legendary startup accelerator that helped launch companies like Airbnb and Stripe, is warning that proposed tax policies could fundamentally reshape where American innovation happens.

The Tax That Has Tech Leaders Worried

Tan didn't mince words when he took to X to criticize Rep. Ro Khanna's backing of California's billionaire tax proposal. The Canadian-American venture capitalist wrote that "1/3 of the US stock market is in 'his district,' but won't be in another 10 years because of Ro Khanna's support of asset seizure of post tax wealth and unrealized gains taxes that will kill startups."

That's a pretty dramatic prediction, but Tan's not just worried about tax rates. He's specifically concerned about policies targeting unrealized gains and what he characterizes as "asset seizure of post-tax wealth." His argument? These measures could strangle California's startup ecosystem in its crib.

What's Actually On The Table

The policy causing all this fuss is Khanna's proposed billionaire tax, which would hit California residents with net worth exceeding $1 billion with annual taxes of up to 5% on their assets. The kicker? Those holding at least $20 billion in assets as of January 1 would face a one-time tax bill of $1 billion upfront.

Tan suggests these policies could delay American innovation by a full decade, essentially pushing tech talent and capital to more tax-friendly states. And he's not alone in his concerns. The warning follows advice from David Sacks, venture capitalist and White House AI and crypto czar, who recommended Y Combinator open an Austin office to reduce exposure to California's fiscal pressures.

The Exodus Has Already Started

The billionaire tax has already drawn fire from some of California's wealthiest tech figures. Palantir Technologies (PLTR) co-founder Peter Thiel is among those who've threatened to leave the state if the tax becomes reality. When billionaires start shopping for new zip codes, it's usually a sign that policy debates are getting serious.

For Tan, this isn't just about protecting the ultra-wealthy. It's about whether California can maintain its position as the global center of tech innovation, or whether the next generation of transformative companies will be built somewhere else entirely.