Boston seizes on California’s billionaire tax to lure AI talent

Massachusetts is capitalizing on California’s proposed 5% wealth tax to lure AI talent, particularly founders tied to its elite universities. Half of the top 20 U.S. AI companies’ co-founders attended MIT or Harvard, yet none are headquartered in Massachusetts. The state’s lower tax burden on income compared to unrealized gains—unlike California’s measure—makes it more appealing for startup founders facing potential liquidity crises. California’s tax, targeting assets over $1 billion, could push founders to relocate, as Y Combinator’s Ankit Gupta warned it may bankrupt some. Gupta, hired to lead Y Combinator’s Boston expansion, noted Massachusetts’ 2022 4% surtax on annual income over $1 million is far more manageable. The accelerator is investigating a Cambridge office, prioritizing access to MIT’s engineering talent over Austin’s startup culture. Massachusetts Governor Maura Healey has directly engaged with Silicon Valley leaders, meeting Anthropic, Y Combinator, and Genentech in San Francisco. Her economic development secretary, Eric Paley, emphasized the state’s advantage if other regions tax illiquid assets, citing its lower overall tax rates compared to New York and California. The state’s biotech sector, hit by funding cuts, is also targeting AI companies for relocation. Local CEOs have provided Mayor Michelle Wu with lists of potential firms, while Genentech is expanding in Boston. Despite Massachusetts’ reputation for high taxes, its top individual rate remains below California’s, even with the millionaire’s tax. The shift could reshape AI’s geographic landscape, with Boston’s universities and lower tax risks positioning it as a rival to Silicon Valley. Y Combinator’s potential Boston office and Healey’s outreach signal a deliberate effort to capitalize on California’s policy challenges.