Here's the potential impact a proposed CA billionaire tax could have on Silicon Valley

SAN FRANCISCO (KGO) -- A proposed tax on California billionaires is shaking Silicon Valley, with some tech leaders warning they will leave the state if it passes.

The measure, backed by the powerful health care union SEIU, would impose a one-time 5% tax on billionaires' net worth. Supporters are gathering signatures to qualify the initiative for the November ballot.

On Monday, Gov. Gavin Newsom came out in force against the proposal, telling The New York Times he has "no question" it will be defeated. A longtime opponent of a state wealth tax, Newsom warned it could drive away wealthy innovators whose companies help fuel California's position as the fourth-largest economy worldwide.

Newsom told the Times he's privately working to quash the effort, saying, "I'll do what I have to do to protect the state," which is home to the highest concentration of billionaires.

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UC Berkeley law professor Brian Galle, who is advising the campaign, argues the tax could help offset California's budget deficit and rising health care costs, in part fueled by federal government cuts.

"The bigger hit to California's economy is if we can't cover that sharp spike in health care costs. That's what's going to stop the next generation of startups," he said.

Not all billionaires oppose the idea. NVIDIA CEO Jensen Huang told Bloomberg he's "perfectly fine with it," saying he plans to stay in Silicon Valley for its talent pool.

Critics, including venture capitalist Chamath Palihapitiya, say the plan will drive young innovators out of the Golden State.

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"It's very difficult if you're an entrepreneur with a good idea to start building here, because if you get stuck in success with a bunch of illiquid stock and have no way to pay 5% of that value, you're going to bankrupt your own company," Palihapitiya said on the "All-In" podcast.

If some of the billionaires threatening an exodus were to leave California, it would have drastic impacts on the state's budget in the future. California's $350 billion budget for the upcoming fiscal year is funded largely by personal income taxes, with top earners contributing nearly half of that.

Supporters need more than 870,000 signatures to qualify the measure for the ballot. Even if it ultimately passes, the tax would apply to top earners living in California as of Jan. 1, 2026, even if they later leave.