Palmer Luckey has been a California billionaire since he was 21 years old, when he sold his first company, virtual reality headset maker Oculus VR, to Facebook for $2 billion in 2014. His current company, defense tech firm Anduril, is headquartered in in Costa Mesa, California, not far from Long Beach, where Luckey grew up. And Anduril is worth far more. It was last valued at $61 billion.
While Luckey clearly despises the proposed California billionaire wealth tax, a ballot measure that would tax the net worth of the state’s richest residents, he said he’s not leaving California over it.
“I think that this tax act, if you can call it a tax, is going to cause a lot of problems. It’s causing a lot of people to run who I don’t want to be running. It’s going to cause companies that I work with to leave the state, which is a problem for me. As of right now, though, I’m not running. I am staying. I think California is something special. I want to fight for California,” Luckey said during an invite-only press conference on Monday.
He added that he’s felt pressure from other billionaires to declare his intention to leave.
“This has been a point of friction between me and some of my other billionaire friends,” he said. “They’ve said things like ‘Palmer, you have to have solidarity for us. You can’t enable these really bad policies. If you stay and if you don’t leave, it’s going to show them that there’s no consequences.’ I empathize with that argument, but it’s not one that I’m going to participate in right now because I still believe that we can fix things.”
Luckey added that it’s not the idea of paying taxes that he takes issue with, but that the bill is sponsored by specific union, a unit of the United Healthcare Workers, that wants to use the money the tax would raise “for their uses,” he said. The measure’s sponsors say the money will be used for “health care, education, and food assistance” programs in the state, and they specifically name Medi-Cal, California’s health coverage program for low-income residents.
Another issue is for Luckey, as for others, is how the proposal would assess the tax owed, as well as the penalties. It would tax “wealth” including unrealized assets that haven’t been sold, and illiquid assets that are hard to turn into cash. And penalties can be assessed as high as 40%.
“It’s almost like a seizure of future wealth in that way. That’s not even the real problem. The biggest problem is the tax on control of your own company,” he said. According to the Tax Foundation, a tax policy think tank, the proposal treat someone someone with voting control as owning at least that same share of the company. This would affect founders with super-voting shares, which carry extra votes per share, because they may own only a minority of the company. A founder with 40% of the votes but 10% of the ownership, for example, could be taxed as if they owned at least 40%, and selling all their shares might not cover the bill. (The measure’s drafters say that reading is mistaken, arguing that super-voting shares are publicly traded assets and are valued differently.)
“I’m a founder who’s raised a bunch of money, I’ve diluted myself a lot. I’ve given equity to my employees,” Luckey said of his own situation. “My employees have more equity in Anduril than me. I’ve given a lot of equity out to people, but what I have done is I’ve preserved the voting rights so that as those employees sell their shares to pay off their home loans or whatever, that the voting control doesn’t go to other people outside the company.”
He also said that if he were ever to leave, “I lose all those voting rights. My voting rights only stick as long as I’m an American citizen living in America, running Anduril.” The condition makes sense given that Anduril is primarily a defense contractor selling equipment to the U.S. military.
In Luckey’s case, he believes he could owe 5% of Anduril’s $61 billion, a bill of around $3 billion, just on that asset alone. (For comparison, Larry Page, the Google co-founder who did leave California, still has 27% voting control of Alphabet, Google’s parent company, which has a market value of just under $4 trillion.)
“But I’m planning on staying in California. I’m going to keep fighting it,” he said. “I’m hoping that this doesn’t pass. I’m hoping if it does pass, that there are legal challenges to say, “Hey, you can’t post facto seize people’s past and future wealth, nor can you tax their voting interests in their own company. That’s truly unprecedented. That is not a tax on ownership. It is a tax on control.”
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