Sure thing. You asked for a post explaining the nuance so here you go! I'm sorry for the length; you'll see that at the end it all ties back to funding health insurance for your constituents… As you know, companies can be private or public. Holders of public company stock can trade in liquid, public markets after the lock-up period expires. Let's ONLY focus on startups that are private because this is an absolutely critical policy point. It's very easy to accidentally kill the goose (Silicon Valley) that lays the golden eggs (startups that get big and create tax revenue for California). From your reply, I think you are assuming that the situation where a private company founder has "truly illiquid" stock is an exception. This is not the case. Example: a private company raises a new round at a multi-billion dollar valuation! Everyone is excited! This thing might actually work! Some shareholders like the founders (and potentially early employees) might now need to pay the wealth tax, but they can’t pay a tax in company stock. Assuming a typical situation where the founder’s net worth is entirely tied to their company, they will need to sell more than the $$ amount levied by the wealth tax because they need to first pay capital gains. In other words, they face a double tax event. Now let's fast forward a single year. Unfortunately things haven’t gone according to plan (either due to macro events or other factors) and the company can’t raise an up-round or even execute a tender offer at the same valuation again. There isn't any secondary demand at the last round price; there are simply no buyers. Now the founders need to pay the 1-2% wealth tax again. But all their “wealth” is “paper money” from the company stock they hold at the last valuation. What can they do? Three options come to mind. LMK if I’m missing something. (1) Since the founders can’t sell stock at the last round valuation, they could reduce the valuation of the company through a down round. This risks key team members leaving. It also might be harder to recruit new key talent. And this is assuming there's an investor willing to do a down round, which is not always the case. This is also ethically complicated… if the founders choose this option purely due to a personal tax situation, they might be prioritizing their needs above the needs of their team. (2) The founders could take out a big loan to pay a tax bill that might not even be accurate. This is very risky. Even if the company executes perfectly, the macro environment might falter and the founders might never be able to repay the loan. The founders are potentially risking personal bankruptcy. (3) If it's a California wealth tax... then the founders could just leave California. This is not a contrived situation. Most startups don't work out. Almost all private startups have ups and downs... even in the “growth” stage with "billions" in market cap. And the oscillations of these ups and downs are happening faster and faster these days for many private companies. The best startup founders plan ahead and feel responsibility for their employees. If they think staying in California is a risk to their business, their employees, their families... then they will simply leave for somewhere else. Silicon Valley startups (ironically) follow the herd. Once enough respected companies / founders establish a pattern, other startups will follow, even if the wealth tax does not apply to them yet. (Every startup founder believes their company will be the next big thing.) So, in summary, if there's a California wealth tax that applies to the founders of private companies: 1. There are many situations where the founders of private companies will not be able to pay it and will be forced to consider leaving California. 2. Smart founders thinking ahead will mitigate this risk by leaving California before the situation applies. 3. The herd will follow the best and brightest founders / companies. 4. California will lose the next generation of big, important, job / tax generating companies. 5. This will lead to less tax revenue, less state healthcare funding, less education funding, etc. I hope this post helped explain why it's a bad idea to try and implement a California based wealth tax that targets the unrealized gains of private company stock. This is just ONE aspect of why a California wealth tax is bad policy. Happy to discuss further…