California’s AI boom has made billionaires richer. Now a wealth tax is on the ballot

California’s proposed billionaire tax poses a straightforward question of fairness. Should people who accumulated extraordinary fortunes from California’s economy contribute more to the public institutions that helped make those fortunes possible? Or would taxing them drive away the investment and innovation that created Silicon Valley’s wealth?

Congress’s “Big Beautiful Bill” is projected to strip tens of billions from public education, food assistance and health care—especially Medi-Cal and SNAP. These cuts will force hospitals, clinics, nursing homes, and home-care providers to eliminate services or close. Proposition 40’s one-time 5 percent billionaire tax would temporarily offset these severe cutbacks in vital social services for millions of Californians.

If voters pass this emergency response, roughly 3.4 million Californians will benefit directly through preserved health coverage. The tax could also help millions more indirectly by supporting social services and food aid, including the more than three million households who rely on food assistance.

Yet beneath this dispute lies a darker paradox left untouched by this debate: California is becoming increasingly dependent on tax revenue from speculative fortunes generated by menacing technologies that threaten humanity and the planet, even as they undermine the vital programs those taxes are meant to protect.

Most of California’s billionaire wealth is concentrated in the technology, venture-capital and semiconductor industries driving the AI boom. Because Proposition 40 would tax assets rather than income, nearly three-quarters of the burden would fall on technology founders, executives and venture capitalists. Silicon Valley moguls have responded by pouring millions into a slick media blitz designed to frighten and confuse voters.

Some attack ads are outrageously underhanded. One AI-generated ad claims marauding tax agents will pillage Golden State suburbs if voters pass Proposition 40. This nearly two-minute spot depicts a club-wielding government bureaucrat chasing and tripping a child on a bike, and another stealing a boy’s scooter. A tax collector who resembles Bernie Sanders attempts to pry a stroller with a baby inside from a mother. The ad’s narrator warns that under Prop. 40, “every Californian will have to report all their assets to the state tax board—and don’t dare miss anything, or you’ll pay a 40% penalty.”

The money behind this multimedia assault comes from Google co-founder Sergey Brin and other tech billionaires bankrolling “Building a Better California”, an advocacy group formed to oppose the proposed wealth tax. So far, their PAC has received more than $156 million, including more than $100 million from Brin, $17 million from L. John Doerr, $12 million from Chris Larsen, and $3 million from Eric Schmidt.

Building a Better California condemns Proposition 40 as a one-time political workaround rather than a stable way to fund health care. Yet it also insists that this one-time tax, spread over five years, is so onerous that it would drive billionaires out of California, shrink the tax base and reduce investment, startup formation and job growth.

Is a billionaire exodus likely? For many tech tycoons, the business value of staying in California outweighs the cost of the tax. Nvidia CEO Jensen Huang, who faces an estimated $8 billion personal tax bill if the measure passes, has publicly stated he has no intention of leaving California. Huang emphasized that Silicon Valley’s concentrated ecosystem of engineers, AI researchers, and venture capital is irreplaceable for scaling global tech companies. Economic data from similar progressive tax experiments, such as Massachusetts’ 2022 millionaire surtax, showed that fears of mass wealth flight rarely materialize on a grand scale, as ultra-wealthy individuals remain anchored by family, business networks, and lifestyle preferences.

The state’s tiny class of around 200 billionaires own more than $2 trillion—equivalent to roughly half of California’s entire annual GDP. Yet they amount to less than 0.01 percent of California’s 19 million income taxpayers. Since 1982, the wealth of California’s billionaire class has multiplied roughly 38-fold. Between 2023 and 2025 alone, billionaire wealth surged another 144 percent. Under Prop. 40, the state’s billionaires would retain 91.5 percent of their wealth gain, and it could raise approximately $100 billion.

The AI Trap

A tax on billionaire wealth poses a fair and temporarily effective way to offset the ruinous cuts imposed by Trump’s ‘Big Beautiful Bill.’ But the fight over who receives how much of the economic pie overlooks two more disturbing questions:

1. Is California’s budget becoming dangerously dependent on wealth generated by a speculative AI boom that may soon collapse?
2. Wouldn’t success result in the rapid expansion of a malignant technology that may swell state coffers but eliminate thousands of jobs, devastate the environment, and dramatically amplify inequality and hardship across the state and the world?

Artificial intelligence could be used to reduce drudgery, expand knowledge, improve medicine and direct scarce resources toward human need. But technology does not choose its social purpose. Under an economic order compelled to maximize profit amid tightening material and ecological constraints, AI gives capital and governments an unprecedented ability to automate extraction, discipline labor, manage scarcity, intensify surveillance and monetize crisis. The crucial question is not whether AI makes the economy more efficient, but what it makes the economy more efficient at doing. Harnessed by capitalism, AI could become the intelligent furnace of a self-consuming system—not the cause of contraction, but a machine that makes it faster, deeper and far more difficult to resist.

California rose during an extraordinary era of capitalist expansion powered by abundant energy, cheap resources and expanding markets. Gold, oil, agriculture, aerospace and Silicon Valley generated industries, jobs, infrastructure and tax revenue. Despite the inequality and environmental damage, this activity transformed immense flows of energy and materials into productive capacity. During California’s postwar ‘Golden Age,’ tax revenues financed world-class systems of education, transportation and water.

Today the state’s finances increasingly depend on something different: expectations of immense future profits from artificial intelligence. Mega-rounds for companies such as OpenAI and Anthropic helped California attract more venture capital than the other 49 states combined. That influx supports high-paying jobs and inflates stock values and taxable capital gains before the industry has demonstrated that its investment can earn durable profits.

For now, the boom is enriching technology investors, lifting the stock market and filling Sacramento’s treasury. When Governor Gavin Newsom finalized the state budget, a $16.5 billion revenue surge erased a projected multibillion-dollar deficit. Between $13.6 billion and $14 billion came from personal-income taxes and capital gains swollen by enthusiasm for AI. Because California relies heavily on gains realized by a small number of ultra-wealthy technology financiers, a sharp market correction would quickly trigger a state budget crisis.

The stakes are substantial. Although the AI industry has never turned a collective profit, AI spending accounted for all US economic growth in the first half of 2025, and AI-related companies represented between 45 and 51 percent of the S&P 500’s market value. If those stocks collapse, they will drag the broader market and California revenues down with them. While the state could use the inflated wealth of this speculative boom to protect health care and other essential services, it also risks social protections becoming even more dependent on volatile fortunes.

If the boom survives, California confronts the opposite danger: essential programs will become increasingly reliant on taxing AI technologies that eliminate jobs, concentrate wealth, consume enormous amounts of energy and resources, accelerate climate chaos and intensify the very crises those programs try to address. These immediate political and economic hazards arise well before the potential threat that advanced AI escapes human control.

Capitalism’s Catabolic Collapse

The most critical energetic bottleneck facing global capitalism is the decline of Energy Return on Investment (EROI). EROI measures how much usable energy society gains after deducting the energy required to obtain it. As high-quality energy and other vital resources become depleted and ecological damage mounts, more of society’s energy and capital must be spent remediating the damage and securing the next supply. Our finite planet places limits on an economy committed to perpetual growth.

However, the pressure to maximize profit does not weaken when growth does. Instead, capital downshifts and begins extracting profit from the accumulated wealth previous growth created.

Governments cut budgets and privatize public services. Private-equity firms buy functioning companies, load them with debt, cut payrolls and sell their assets. Corporate health-care chains divert money from patient care to investors. Housing becomes a speculative asset; infrastructure deteriorates while investors extract tolls and fees. Climate disasters open markets for reconstruction, insurance repricing and land acquisition. War and authoritarianism produce lucrative contracts for weapons, prisons and surveillance. If the AI bubble bursts, the same logic will shape the inevitable fight over who receives the bailouts and who absorbs the losses.

The madcap train scene in The Marx Brothers Go West (1940) captures the essence of this debacle. The wacky brothers commandeer a locomotive that runs out of fuel. In desperation, they ransack the train, breaking up the passenger cars, ripping up seats and tearing down roofs and walls to feed the steam engine. By the end of the scene, terrified passengers desperately cling to a skeletal train, reduced to little more than a fast-moving furnace on wheels.

Industrial capitalism is beginning to follow the same logic. When new growth becomes harder to sustain, profits are fueled by consuming the productive, social and ecological structures built during previous expansion. The train keeps moving because the passenger cars are being thrown into the furnace.

Biologists use the term catabolism to describe an organism that consumes its own tissue when energy is scarce. ‘Catabolic capitalism’ is the economic equivalent: a profit-hungry system that sustains accumulation by dismantling the institutions, productive capacity and ecological conditions society depends on. Catabolic capitalism does not simply profit despite breakdown; it learns to profit from breakdown, turning scarcity, insecurity, chaos, conflict and disaster into opportunities for extraction. In its catabolic phase, capitalism becomes a self-cannibalizing system whose insatiable hunger for profit can only be fed by devouring the society that sustains it. As it rampages down the road to ruin, this system gorges itself on one self-inflicted calamity after another.

Artificial intelligence arrives at precisely this moment. It did not create capitalism’s voracious appetite, but it could become the most powerful technology yet devised for accelerating its catabolic implosion. In corporate and government hands, AI can identify what can be cut, sold, privatized, automated, surveilled or exploited; calculate how much can be extracted; anticipate resistance; and act at speeds no human bureaucracy can match. The immediate danger is not that super-intelligent machines become our overlords. It is that increasingly clever machines remain obedient to the powerful institutions that control them and pursue their destructive objectives with unprecedented efficiency.

AI could automate the hunt for wages to cut, assets to sell, prices to raise, taxes to avoid, regulations to exploit and public functions to privatize. AI’s catabolic capacities can penetrate everyday life. Using immense behavioral datasets, AI can estimate what a particular consumer will pay, what wage a worker will accept, which insurance claim is easiest to reject, which borrower can be charged more and which tenant cannot afford to move. The question shifts from what a service costs to how much this person can be forced to surrender for something essential. 

AI systems built to monitor and discipline workers can also map social networks, track protesters, anticipate unrest and customize political persuasion. Governments and corporations gain powerful tools to control people marginalized by economic disorder instead of correcting the conditions that impoverished them. In this way, AI becomes an effective catabolic wrecking ball, making demolition faster, cheaper and more relentless.

California’s Deal with the Devil

More than most states, California is vulnerable to the future of AI because its finances increasingly depend on wealth generated by the AI boom. If AI fails to generate the profits needed to justify today’s speculative investments, technology shares will fall, venture capital will retreat, startups will collapse, and capital gains will shrink. California would lose revenue just as layoffs and recession increased demand for health care, unemployment assistance and other public programs. The dot-com crash and the 2008 financial crisis demonstrated how quickly an asset-driven windfall can become a budget emergency. An AI crash could reproduce that crisis on a larger scale.

Proposition 40 should be understood as an emergency defense, not a cure-all. When a tiny class holds extraordinary fortunes while health care, housing, education and climate stabilization remain underfunded, taxing that wealth is entirely reasonable. A wealth tax cannot alter the catabolic condition causing breakdown, nor can it stop corporations from using AI to replace workers, strip assets, extract monopoly rents, expand surveillance, automate warfare, or pillage the planet; but it is necessary to preserve institutions, reduce suffering and distribute the costs of economic contraction more fairly.