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Entrepreneur and investor Chamath Palihapitiya has warned that California is facing a deepening political and fiscal crisis as major founders and companies continue to leave the state.
In a widely circulated post, Palihapitiya argued that the departures have already cost California tens of billions of dollars in lost tax revenue, with the total potentially rising beyond $200 billion as those businesses expand elsewhere. He linked the losses to what he described as political hostility towards innovation, warning that further exits could weaken the state’s job market and tax base.
California’s turning point
At the centre of Palihapitiya’s argument is Elon Musk, whose companies Tesla and SpaceX shifted key operations from California to Texas.
He traces the roots of that move to tensions during the COVID-19 lockdowns, which he says highlighted a political climate increasingly hostile to major innovators.Palihapitiya pointed to a 2020 social media exchange involving then California Assemblymember Lorena Gonzalez, who used profane language against Musk amid disputes over pandemic restrictions. Musk’s brief reply, “Message received,” has since been cited by critics as a symbol of a broader breakdown between California’s political leadership and its most productive business figures.
How the tax losses add up
The $200 billion figure cited by Palihapitiya is an estimate and projection rather than an official state calculation. He argues it reflects the long term impact of lost income taxes, capital gains and corporate growth following the departure of founders and the highly paid employees who moved with them. In his view, the number will continue to rise as Tesla grows and if SpaceX eventually goes public while based outside California.Palihapitiya contrasts this outcome with what he believes California could have achieved by working more collaboratively with innovators. He argues that embracing major employers and founders could have generated hundreds of billions of dollars in tax revenue over time, helping to sustain public finances rather than deepen deficits.
A political warning, not just an economic one
Beyond the financial estimates, Palihapitiya frames the issue as a political failure.
He accuses California’s leadership of fiscal mismanagement, overspending and a reluctance to conduct meaningful audits or impose spending restraint. According to him, the state’s response to shrinking revenues has been to seek more money from those who remain, rather than reform how public funds are managed.He warns that if the current trajectory continues and more founders and investors leave, California risks losing high value jobs and further weakening its tax base.
Without significant reforms, he suggests the state could face severe financial stress within the next decade.
Texas and the national reaction
Palihapitiya’s comments quickly drew attention from political figures outside California, including Ted Cruz, who echoed the criticism and publicly invited him to relocate to Texas. Cruz framed the moment as evidence of Texas’s appeal as a low tax, business friendly alternative to California’s regulatory environment.Palihapitiya’s response signalled openness to the idea, reinforcing the perception that competition between US states for talent and capital is intensifying.
A divided response
Reaction to the warning has been sharply split. Supporters argue Palihapitiya is highlighting a real and growing problem, pointing to rising costs and company departures as evidence of policy failure. Critics counter that Musk’s move was driven by personal and financial factors that predated any single political incident, and that the fiscal impact is being overstated.What is clear is that the debate over California’s tech exodus has moved beyond individual companies. As founders, investors and politicians continue to clash, the argument has become a broader test of how California balances regulation, taxation and innovation, and what it risks losing if that balance continues to shift.
English (US) · 