California Democrat Rep. Ro Khanna says he has a solution for Silicon Valley elites angered by his embrace of a wealth tax: Tackling fraud.

Over the weekend, Khanna came under fire from some donors and allies in the tech industry after he endorsed a wealth tax. Labor groups in California are trying to add a proposal for a statewide tax on billionaires to the November ballot, prompting some wealthy Californians to warn they will leave the state if it passes and support a primary challenger to Khanna in next year’s elections.

In an interview with CNBC, Khanna, who represents Silicon Valley, said he’s launching a bipartisan effort from his post on the House Oversight and Government Reform Committee to root out state-level fraud to ensure the new tax windfall doesn’t go to waste. The effort, he said, will make sure that funds go toward health care and other essential services.

“If you want, as I do, to advocate for Medicare for all, to advocate for higher taxes, you have to have the public trust,” Khanna said. “People need to have a receipt for what their money is going toward. You can’t have corruption in the government and waste in the government and then expect people to support the progressive ideals that I have.”

Khanna said he will find someone on the other side of the aisle to work with on the issue, similar to his recent partnership with Rep. Thomas Massie, R-Ky., that compelled the release of files relating to notorious sex offender Jeffrey Epstein. Khanna said he hopes to commission a bipartisan Government Accountability Office report on state-level fraud and hold hearings on the issue.

U.S. Representative Thomas Massie (R-KY), accompanied by U.S. Representatives Marjorie Taylor Greene (R-GA) and Ro Khanna (D-CA), speaks during a press conference on the Epstein Files Transparency Act ahead of a House vote on the release of files related to the late convicted sex offender Jeffrey Epstein, on Capitol Hill in Washington, D.C., U.S., November 18, 2025.

Annabelle Gordon | Reuters

Khanna’s pitch comes after the California State Auditor released new reports that identified potential fraud in the state. Meanwhile, alleged fraud cases in Minnesota, some leading to indictments first handed down in 2022, have also seen renewed national attention from Republican lawmakers and the Trump administration. 

Many who criticized Khanna’s endorsement of a wealth tax cited those instances of fraud as a reason that the tax won’t work.

“If, after audits and zero based budgets, there are revenue gaps, I’d support a wealth tax,” said Chamath Palihapitiya, a prominent tech investor and Trump supporter, in a post to X. “Until then, you and your ilk are just getting more incentives for fraud, voter manipulation and larceny.”

Khanna noted that his new oversight effort is in response to “feedback from constituents in my district and leaders” over his embrace of a wealth tax.

He added that the investigation will cover more than just the fraud uncovered in California and Minnesota, and that finding a Republican partner will prevent the investigation from becoming a partisan affair.

“It’s not going to be a blue state or a red state thing,” Khanna said. “Obviously, there have been the reports in Minnesota and California, but it’s beyond that. We need to look at state government and making not just an issue against blue states, but to expose where this fraud is happening and what we can do about it.”

California and Minnesota are both run by Democratic governors. Minnesota Gov. Tim Walz, the former Democratic vice presidential candidate, is up for reelection in 2026. House Oversight Committee Chair James Comer, R-Ky., has called on Minnesota officials to testify before his committee.

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The California wealth tax proposal, known as the 2026 Billionaire Tax Act, would levy a one-time 5% tax on the assets of the state’s billionaires to shore up an expected shortfall in the state’s health-care budget. The Service Employees International Union-United Healthcare Workers West labor union is pushing the measure.

The measure still needs to garner enough signatures to qualify for the ballot. If it does, it would be up to California voters to decide on installing the new tax. 

Tech leaders opposing the proposal are concerned the tax would apply to unrealized gains, meaning startup founders with a net worth of more than $1 billion based on the paper value of their private stock would be on the hook despite their wealth being illiquid. 

Khanna acknowledged those concerns in the interview, saying he supports a wealth tax to pay for health care in California and federally, but with the caveat that there are “workarounds for stock that is restricted with illiquid founders who have companies that are not profitable.”

“You can do it in a way that doesn’t hurt the startup paper billionaires with restricted stock,” he said. 

The post Ro Khanna calls for fraud probe after California wealth tax firestorm appeared first on Our Story Insight.

Democrat Rep. Ro Khanna has embraced a wealth tax in his home state of California, and his longtime allies in Silicon Valley are now threatening to abandon him.

California labor groups are trying to add a proposal for a statewide tax on billionaires to the November ballot. The proposal is causing a rift among Democrats and enraging some in the tech community, who warn they will leave the state if the measure is adopted. 

Khanna last week reacted to the potential exodus in a social media post, saying he echoes what President Franklin Delano Roosevelt said with “sarcasm of economic royalists when they threatened to leave, ‘I will miss them very much.'”

The post prompted not only criticism from tech leaders but also calls for Khanna to be primaried. 

“Ro has done a speed run alienating every moderate I know who has supported him. Including myself,” wrote Martin Casado, a partner at venture capital firm Andreessen Horowitz, in a post on X. “At least that makes voting him the f— out all the more gratifying.”  

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Garry Tan, CEO of startup accelerator Y Combinator, wrote it’s “Time to primary him.”

Associates of Andreessen Horowitz and Y Combinator are among the top donors to Khanna’s congressional campaign committee, according to recent campaign finance disclosures.

The proposed ballot measure, dubbed the 2026 Billionaire Tax Act, is being pushed by the Service Employees International Union-United Healthcare Workers West labor union. If enacted, it would levy a one-time 5% tax on the assets of California billionaires to shore up an expected shortfall in the state’s health-care budget. 

Should the measure garner enough signatures to qualify for the ballot, it will be up to California voters to decide whether to implement the tax, which would be retroactive to Jan. 1, 2026. 

A major reason that tech investors, executives and entrepreneurs are united in vocal opposition is the concern that the tax would apply to unrealized gains. That means that startup founders with a net worth of over $1 billion based on the paper value of their private stock would have to pay tax on their wealth even though it’s illiquid.

“We’re absolutely going to have to figure out how our society adapts to a rapidly increasing wealth gap,” wrote Reddit co-founder and venture investor Alexis Ohanian, in a post on Sunday. “But the answer is definitely not taxing unrealized gains.”

Sarah Drory, a spokesperson for Rep. Khanna, told CNBC in a statement that the congressman is a “passionate supporter of technology and entrepreneurship,” noting that he co-wrote the CHIPS and Science Act, a federal program designed to boost domestic semiconductor manufacturing.

Drory said that while Khanna supports a “modest wealth tax on billionaires to deal with staggering inequality and to make sure people have health care,” he also advocates “for commonsense workarounds for startup founders whose companies are not profitable and who have illiquid stock.”

California Governor Gavin Newsom attends the UN Climate Change Conference (COP30), in Belem, Brazil, Nov. 11, 2025.

Adriano Machado | Reuters

Democratic California Gov. Gavin Newsom, who is widely considered a contender for the presidency in 2028, opposes state-level billionaire taxes.

“You can’t isolate yourself from the 49 [other states],” Newsom said at the New York Times Dealbook conference earlier this month. “You’ve gotta be pragmatic about it.”

But pressure is growing nationally for Democrats to back efforts to tax the wealthy, as polls repeatedly show wide support for the idea. A Pew Research Center poll earlier this year found that 58% of those surveyed support raising taxes on those making more than $400,000. Among the Democrats surveyed, 74% supported the higher taxes. 

Republicans, meanwhile, have been making increasing inroads in Silicon Valley, home to a number of tech billionaires who have traditionally leaned Democratic.

Tech CEOs this year have flocked to the White House to curry the favor of President Donald Trump, who has placed tech leaders in roles within his administration.

Khanna carried California’s 17th Congressional District by more than 30 points in 2024. The deep-blue seat would be highly unlikely to flip to Republicans in 2026.

In a follow-up post on X, Khanna restated his support for a wealth tax. 

“Yes, we need entrepreneurs to commercialize disruptive innovation,” Khanna said. “But the idea that they would not start companies to make billions, or take advantage of an innovation cluster, if there is a 1-2 percent tax on their staggering wealth defies common sense and economic theory.”

Vinod Khosla, the founder of Sun Microsystems and Khosla Ventures who boasts a net worth of about $12.6 billion according to Forbes, disagreed with Khanna and said the billionaires will leave the state. 

“You are so wrong Ro,” Khosla said in a post on X. “Top prospects for generating wealth in the state will almost certainly leave the state. Every advisor would advise every enterprise that gets big momentum to have key people relocate to another state.” 

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