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Mark Cuban told Rep. Ro Khanna, D-Calif., that he “doesn’t understand business” during a heated clash over California’s proposed 5% billionaire wealth tax, warning it could drive startup founders and investors out of the state.

The exchange centered on California’s Proposition 40, a controversial ballot measure that would impose a one-time 5% wealth tax on residents with more than $1 billion in assets.

The measure has been endorsed by the California Democratic Party, while some notable leaders, including Gov. Gavin Newsom, have expressed opposition.

In a video posted on X on Saturday, Khanna made the case for the tax, arguing that it would help preserve health care for working-class Californians. He said the “Sacramento establishment” and lobbyists opposing the measure were “blatantly out of touch.”

STEVE HILTON WARNS CALIFORNIA ECONOMY WILL ‘ABSOLUTELY COLLAPSE’ UNDER ‘INSANE’ BILLIONAIRE TAX

Mark Cuban, left, and Rep. Ro Khanna, D-Calif., clashed on social media over California’s proposed 5% wealth tax on billionaires. (Leah Millis/Reuters; Nathan Laine/Bloomberg via Getty Images / Getty Images)

Cuban responded by arguing that founders of rapidly appreciating startups can become billionaires on paper without having hundreds of millions of dollars in liquid assets available to pay the proposed tax.

“They are the definition of cash poor, stock rich,” Cuban wrote on X.

He warned that the measure could cause startup founders and investors to leave California.

“If this passes, only idiot startup founders stay in Cali,” Cuban wrote.

TRUMP WARNS NEW HOCHUL, MAMDANI PIED-À-TERRE TAX COULD ACCELERATE NYC WEALTH EXODUS

Billionaire investor Mark Cuban warned that California’s proposed 5% wealth tax could drive startup founders and investors out of the state. (Christian Petersen/Getty Images / Getty Images)

Cuban went further, warning that the measure could also influence where he invests.

“I will make NOT being in California a pre requisite for an investment,” he continued.

“Ideology is not a strategy Ro,” he added.

Khanna then proposed a workaround for founders whose wealth is largely tied up in private-company stock.

“Why not a non recourse loan for pledged stock as collateral for this situation?” Khanna wrote.

KEN GRIFFIN’S NYC SKYSCRAPER MOVES FORWARD DESPITE FEUD WITH MAYOR ZOHRAN MAMDANI

Rep. Ro Khanna, D-Calif., defended a proposed one-time 5% wealth tax on California residents with more than $1 billion in assets. (Win McNamee / Getty Images)

Khanna proposed addressing the concerns surrounding illiquid founders by allowing them to pledge shares in their companies as collateral for a government loan that could then be used to pay the wealth tax.

The loan could remain outstanding for roughly 10 years, after which the founder would either repay the government in cash or the government would take possession of the pledged shares. Because the loan would be nonrecourse, the founder would not be personally liable if the company failed.

Cuban blasted the proposal.

“Ro, that’s insane,” he wrote.

Cuban argued that California would effectively lend founders money that would immediately be returned to the state as payment of the tax, meaning the arrangement would initially generate no additional cash revenue from those taxpayers.

“What’s the point of that?” he wrote.

BOB IGER, JOSH KUSHNER SHOCKINGLY PURCHASE LAKERS MONTHS AFTER MARK WALTER BECAME MAJORITY OWNER

California Gov. Gavin Newsom has expressed opposition to the proposed one-time wealth tax on the state’s billionaires. (Brandon Bell/Getty Images / Getty Images)

Cuban also argued that California could eventually wind up owning shares in private companies if founders were unable to repay the loans.

“Cali, You make it. We take it!” Cuban wrote.

Khanna pushed back on Cuban’s criticism, arguing that the government would still collect the tax from billionaires with liquid assets.

“The government would still collect from the vast majority of billionaires who are not illiquid,” Khanna wrote.

Khanna claimed that 72% of billionaire wealth is held in public stock and said the proposed financing mechanism would be aimed at true “paper billionaires” whose fortunes are tied to illiquid assets. He argued that if a private company succeeds, California would ultimately collect on the loan, while founders would not be personally liable if the company failed.

CALIFORNIA VOTERS TO CONSIDER BALLOT MEASURE TO INCREASE TAXES ON BILLIONAIRES

Mark Cuban warned that if California’s proposed billionaire wealth tax passes, he would make not being based in the state a prerequisite for certain startup investments. (Tim Heitman/Getty Images / Getty Images)

Khanna then broadened his argument, telling Cuban that ordinary Americans support higher taxes on billionaires.

“Mark, come on a road trip with me around California, Pennsylvania and the country and ask ordinary Americans how they feel about a billionaire tax,” Khanna wrote. “Most say, I promise you, why only 5 percent?”

Cuban shot back: “You don’t understand business Ro.”

He argued that even a successful founder could spend 10 years growing a company, create thousands of jobs and pay hundreds of millions of dollars in federal and state taxes without ever having $250 million in liquid assets available to repay the proposed state loan.

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Rep. Ro Khanna, D-Calif., argued that California’s proposed billionaire tax would help protect health care for working-class and middle-class residents. (Tom Williams/CQ-Roll Call, Inc via Getty Images / Getty Images)

“Is that what you want your state to be?” Cuban wrote.

“Next tweet we can discuss who the money is going to with Prop 40,” he added.

Jane Street, the powerhouse Wall Street trading firm, lost about $15 billion in July partly due to the troubles at hedge fund Situational Awareness, according to people familiar with the matter.

It was the firm’s worst monthly loss ever, one of the people said. Jane Street is still enjoying its best trading year with revenues of more than $40 billion through July, the person said, but the losses are surprising for a firm known for its risk management. Losses on AI stocks exacerbated the pain.