California’s next governor won’t be chosen until November, but the debate over a proposed wealth tax is already defining the race.

In the primary debates, candidates from both parties were pressed on whether California should impose a one-time 5% wealth tax on billionaires. What’s most notable: Deep skepticism cuts across party lines about the tax’s design, consequences and impact on our state’s competitiveness. 

Despite these concerns, state authorities confirmed this week that supporters of the wealth tax had secured the number of signatures to qualify the measure for California’s November 2026 ballot. 

The measure’s primary sponsor has now come forward offering to reduce the wealth tax to 2% if Gov. Gavin Newsom will support it. The governor’s office immediately rejected the proposal, which is still fatally flawed.

The campaign’s fundamental premise is hard to dispute: California has a real affordability problem. For too many families, especially those in underserved communities, the cost of housing, childcare, healthcare and other basic necessities has outpaced wages, putting the California dream out of reach. 

But this proposal is fatally flawed. 

At its core, it targets highly mobile capital, creating incentives for investment and talent to leave. That outcome would only deepen our affordability challenges.

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The nonpartisan Legislative Analyst’s Office found that while the tax could generate short-term revenue, it will likely result in an “ongoing decrease in state income tax revenues of hundreds of millions of dollars or more per year.”  

Simply put: The wealth tax could seriously undermine our state’s value proposition as the global center of innovation.

It is yet another example of the outdated policies and thinking that have contributed to today’s affordability crisis. 

In fact, early signals suggest it is already having unintended consequences of making our state less competitive and slowing job creation.

There’s a better path forward.

First, California must make it easier to scale and grow businesses here. State and local governments can learn a great deal from our most innovative startups: move faster, simplify complexity, use technology to improve the customer experience, measure outcomes and focus relentlessly on execution. 

That means reducing friction across regulatory and compliance systems, digitizing and automating permitting and deploying AI and data platforms to streamline approvals, forecasting and decision-making. It also means implementing smart, targeted incentives that reward companies for creating jobs, investing in R&D and building long-term operations here.

Second, we need an investment-driven approach to housing that invites private capital to be part of the solution.

Beyond streamlining permitting and unlocking underutilized buildings, California should create market-based incentives that align investor returns with housing production.

This could include tax-advantaged housing investment vehicles, public-private co-investment funds, and innovative financing structures that de-risk large-scale development while accelerating delivery. We must prioritize faster construction through tech-forward building methods that reduce costs, improve efficiency and bring housing online more quickly.

In doing so, we can unlock new pools of capital, reduce strain on public budgets and materially increase supply. Done right, this approach will lower costs and expand access for working families across California.

Third, we must modernize our workforce strategy for an era defined by rapid technological change. 

AI is reshaping roles, skills and entire industries.

California has an opportunity to lead by building a dynamic, future-ready talent pipeline through continuous upskilling, employer-led training partnerships and portable learning models that evolve with the market.

With focused execution and coordinated investment, we can ensure that this next wave of innovation expands opportunity, strengthens economic mobility and raises the ceiling for workers across every sector.

The AI revolution is poised to unlock a new wave of innovation, driving better jobs, higher wages, and new pathways into the middle class. Given our region’s history, there is no place better positioned to lead this next chapter than Silicon Valley.

California needs policies that expand opportunity, not shrink it. 

Measures like the “billionaire tax” are doing the opposite of what they intend, ultimately hurting the very people they are meant to help. 

Ahmad Thomas is the CEO of the Silicon Valley Leadership Group.