Tech titans thrived on government money. Tax them

By Dwayne Roberts, especially for CalMatters

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As California faces a projected $100 billion health care funding shortfall in 2026, the debate surrounding the proposed 5% Billionaires Tax Act excise duty on the state’s 200 wealthiest residents—took on an almost theatrical quality.

What should be a simple discussion about public responsibility has instead turned into a spectacle of outrage from some of the richest people on earth. c Silicon Valley especially where fortunes routinely run into the tens of billions, even the proposal of a modest tax on extreme wealth is treated as an assault on the natural order.

Spokespeople for Silicon Valley’s elite have warned that this tax would cripple innovation, casting a small tax on extraordinary wealth as an existential threat to the state’s economic engine. Their argument hinges on the pretense that these riches arose out of sheer private genius, not decades of public investment.

The truth: This tax isn’t a threat to innovation—it’s a long-awaited public dividend from the billionaire class that got rich on the government’s back.

These technological titans did not begin to exist. Their wealth is built on federal research grants, defense contracts, regulatory frameworks and state-guaranteed markets that have shaped every stage of California’s rise as a global technology hub. The mythology of the “free market” has always obscured the reality that Silicon Valley’s success was created through massive government intervention.

The history of Silicon Valley shows this clearly. Long before the advent of venture capitalists, the region’s technological foundations were laid by government spending. The semiconductor boom of the 1950s and 1960s was born out of Cold War industrial policy. Defense contracts for ballistic missiles and missiles guaranteed a market for early chipmakers at a time when consumer electronics were almost non-existent.

This pattern continued. The Internet—the backbone of the modern technology economy—was created by DARPA, an offshoot of the Department of Defense. The foundational algorithm that launched Google was developed at Stanford University through a grant from the National Science Foundation. Larry Page and Sergey Brin conducted their research in a federally funded laboratory, using taxpayer money to solve problems that the private sector had no incentive to touch.

The same dynamic still defines Silicon Valley’s most powerful companies. Peter Thiel’s Palantir survived its early years only because In‑Q‑Tel—the CIA’s venture capital arm—stepped in with a lifeline. Today, Thiel is one of the richest people in the world, in large part because Palantir functions as a de facto arm of the state, fueled by multibillion-dollar government contracts.

California’s regulatory environment has also shaped private fortunes. State mandates for zero-emission vehicles created the credit market that kept Tesla from bankruptcy. SpaceX, meanwhile, is supported by billion-dollar NASA and Pentagon contracts that ensure steady revenue and protect the company from market volatility.

When the critics warn of a “flight of billionaires“, they ignore the underlying economics of why these people will remain rooted in California. The success of their companies depends on the state’s infrastructure, world-class public universities, proximity to supply chain networks, and unparalleled concentration of talent — benefits that cannot easily be replicated elsewhere, no matter how low another country sets its tax rate.

Meanwhile, the consequences of inaction are not theoretical. County hospitals are slowing upgrading equipment, rural clinics are struggling to retain staff and safety net providers are warning they will be forced to cut services. The state’s health care system — already strained by rising costs and an aging population — cannot run a $100 billion deficit with no real harm to millions of residents.

When government provides research, early capital, a regulatory framework and guaranteed markets, it is a full partner in wealth creation. A 5% dividend from 200 individuals who benefited the most is not an attack on success. It is an acknowledgment that the public has helped create their private fortunes.

Passage of the Billionaire Tax Act of 2026 would allow California to stabilize its health care system while reaffirming a fundamental principle: when public money is used to generate wealth, the returns should benefit everyone, not just those at the top.

This article was originally published on CalMatters and is republished under Creative Commons Attribution-NonCommercial-No Derivatives license.