edit: as tsimionescu kindly pointed out below, I misunderstood the 30M threshold. My reasoning seems correct to me but a key premise was wrong, and I agree the proposal is much less onerous than I have painted below:
I personally know multiple startup founders worth $10-$20M on paper who made $120K/year salary for years (or still are.) It’s hardly unusual, startup valuations are high these days, and VCs and the founders themselves want to reinvest in growth, not issuing distributions.
A founder owning 40% at a $50M valuation would feasibly have to double his salary to $240K to afford the $80K/year wealth tax, after paying income taxes on the salary increase in California.
That’s realistically one employee they no longer have the cash flow to hire. A $50M startup may have something like $2M ARR, so if they don’t want to burn investment funds, they could support maybe 8 employees at their ARR level. Knocking out one employee at that size is significant.
Or you could say they should get VC to support hiring more employees. Now the wealth tax is indirectly impacting the founder's equity—forcing you to sell your company.
We can argue whether they should be forced to liquidate a portion yearly for taxes, but let’s not pretend everyone worth $20M on paper can light $80K cash on fire yearly without consequences.