Billionaire Tax Won't Destroy Innovation in California

Tax opponents claim taxing the ultra-wealthy will hurt tech, but history shows innovation thrived even with higher taxes.

Published on Feb. 24, 2026

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A student at a recent Stanford event asked Bernie Sanders and Ro Khanna why most major tech innovations have come from the US, implying that lower taxes on the wealthy drive innovation. However, the author argues that major tech breakthroughs like the personal computer, cell phone, and green revolution all happened when top marginal tax rates were 70-90%, disproving the notion that sky-high wealth is necessary for innovation. The author contends that taxing billionaires at a reasonable rate won't stifle innovation or 'destroy Silicon Valley', but rather start the process of saving civilization from the outsized political influence of the ultra-wealthy.

Why it matters

As California considers a new tax on billionaires, opponents are making the argument that it will destroy innovation and drive tech companies out of the state. This story challenges that narrative by looking at the history of innovation in the US, which thrived even when top tax rates were much higher.

The details

The author cites examples of major technological breakthroughs that occurred when top marginal tax rates were 70-90%, such as the personal computer, cell phone, and green revolution in agriculture. Companies like Hewlett-Packard and Fairchild Semiconductor were founded and innovated during this high-tax era. The author argues that the founders of these companies, like Bill Hewlett and David Packard, would not have abandoned their innovations just because they would have been taxed more, as the wealth they accumulated was still immense by most standards.

  • In 1939, Bill Hewlett and David Packard launched Hewlett-Packard in a Palo Alto garage.
  • In 1957, Fairchild Semiconductor was founded in Mountain View, enabling the digital revolution.
  • The cell phone was invented in 1973, during the high-tax era.

The players

Bill Hewlett

Co-founder of Hewlett-Packard, one of the most innovative and successful tech companies in the world.

David Packard

Co-founder of Hewlett-Packard, died in 1996 with a net worth of $4 billion.

Bill Gates

Co-founder of Microsoft, who would have still been very wealthy even if Microsoft was founded in the 1950s when top tax rates were much higher.

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What they’re saying

“Would Hewlitt and Packard have sat in that garage and said: 'Gee, I think we might be able to turn this oscilloscope into a bigger thing, maybe even a successful company … but then we would have to pay taxes. We might only be worth $4 billion, and not $200 billion. Never mind, let's go work at a hardware store?'”

— Tim Redmond, Author (48hills.org)

“If Microsoft were founded in 1950, Bill Gates would have been very rich, richer than the vast majority of people in the world. He would have been able to live a life most others could only dream of. Would he have given that up and gone to law school like his dad because, say, $4 billion wasn't enough?”

— Tim Redmond, Author (48hills.org)

What’s next

The debate over a billionaire tax in California is expected to be a major issue in the upcoming fall election campaign.

The takeaway

The history of innovation in the US, including the development of personal computers, cell phones, and the green revolution, shows that high taxes on the wealthy did not stifle innovation in the past. Taxing billionaires at a reasonable rate today is unlikely to 'destroy Silicon Valley', but could help address the outsized political influence of the ultra-wealthy.