Billionaire investor Mark Cuban told Democratic congressman Ro Khanna that he “doesn’t understand business” during a heated social media clash over California’s proposed 5% wealth tax on billionaires, warning the measure could push startup founders and investors out of the state, according to Fox Business.
The exchange, which played out on X over the weekend, centred on Proposition 40, a ballot measure that would impose a one-time 5% wealth tax on California residents holding more than $1 billion in assets. The measure has been endorsed by the California Democratic Party, though some prominent figures, including Governor Gavin Newsom, have voiced opposition to it.
Khanna Opens The Debate Over Health Care Funding
Khanna, a Democrat representing California, posted a video on Saturday making the case for the tax, arguing it would help preserve health care for working-class residents of the state. He accused opponents of the measure, including what he called the “Sacramento establishment” and lobbyists, of being out of touch with ordinary Californians, according to Fox Business.
Cuban Pushes Back On ‘Paper Billionaires’
Cuban, responding directly to Khanna, argued that founders of fast-growing startups can become billionaires on paper long before they hold anything close to that sum in cash or liquid assets. He described such entrepreneurs on X as “the definition of cash poor, stock rich,” according to Fox Business’s report on the exchange.
The Shark Tank investor went further, suggesting the tax would ultimately drive talent and capital out of the state altogether, warning bluntly that “if this passes, only idiot startup founders stay in Cali.” He added that he would personally treat a company’s California base as a factor against investing in it, writing that he would make not being headquartered in the state a precondition for backing certain deals, and dismissed Khanna’s position by telling him plainly that ideology is not a strategy.
A Proposed Workaround Draws Fire
Attempting to address Cuban’s liquidity concerns, Khanna floated a possible solution: allowing illiquid founders to pledge their private company shares as collateral for a non-recourse government loan, which could be used to cover the tax bill. Under the proposal, the loan would remain outstanding for roughly a decade, after which the founder would either repay it in cash or forfeit the pledged shares to the state, with no personal liability if the company failed.
Cuban rejected the idea outright, arguing it amounted to the state lending money to founders only to immediately reclaim it as tax revenue, generating no real new income in the process. He summarised his objection sharply, asking what the point of such an arrangement would even be, and warned that California could eventually end up owning stakes in private companies if founders were unable to repay what they owed.
‘You Don’t Understand Business Ro’
The clash escalated further after Khanna urged Cuban to speak with ordinary voters directly, suggesting most Americans would back an even higher rate than 5%. Cuban’s reply became the defining line of the exchange, telling the congressman directly, “you don’t understand business Ro.”
Cuban argued that a founder could spend a decade building a company, generate thousands of jobs and pay hundreds of millions of dollars in federal and state taxes without ever holding the hundreds of millions in liquid cash the proposed loan structure would eventually require them to repay. He asked Khanna directly whether that was the kind of state he wanted California to become.
Khanna Maintains Most Billionaires Are Unaffected
Khanna continued to defend the measure, arguing that the large majority of the roughly 250 billionaires who would fall under the tax do not face the liquidity problem Cuban described, since most hold the bulk of their wealth in publicly traded stock rather than illiquid private holdings. He maintained the mechanism was designed specifically for so-called paper billionaires whose fortunes remain tied up in companies that have not yet gone public.
Cuban’s final message in the public exchange was his most pointed, accusing the proposal of punishing entrepreneurs who reinvest profits into their businesses and workforce rather than extracting cash for themselves, calling the arrangement, in his words, an affront to entrepreneurship.
Neither Cuban’s nor Khanna’s office had issued a further statement beyond the social media exchange as of Sunday. Proposition 40 remains before California voters, with the state’s Democratic Party backing the measure despite continued opposition from Governor Newsom.
