Andreessen talks about the proposal as if he were Putin himself invading Atherton, California, the elite zip code where he resided. until very recentlyIf this tax is implemented, he says, investors will leave the market and innovations will not be funded. “First, it kills startups and venture capital. So, congratulations, it kills the tech industry, basically,” he says. “Second, it kills California’s tax base. California is done for!”
But the carnage doesn’t end there, says Andreessen. Once the government tries this new tax on the rich, it will want more, more, more, until eventually this endangered class of wealthy investors will be milked. Then the government will go after the wealth of people who are not super-rich, but just very rich. Sooner or later, we will all pay wealth taxes. “Presto, chango, somos Argentina!” says Horowitz, and Andreessen is quick to endorse this doomsday scenario.
Before putting on the soundtrack AvoidLet’s back up a minute. There’s no evidence that a tax on unrealized profits would kill venture capital. If Andreessen and Horowitz were to abandon it over tax concerns, others would jump at the chance to play the lucrative startup lottery — even if, God forbid, they had to pay some pre-IPO taxes on spectacular profits.
But there is also little reason to think this tax will be implemented. Biden’s proposal is just that: a proposal. Changing the tax code requires Congressional action. At the very least, Congress would address some of the reasonable objections Andreessen raises, such as the possibility that an investor’s gain could be measured in a temporary spike in a company’s valuation. But Congress is far more likely to reject this, even if the public wants to see the very rich pay their fair share. Consider the utterly indefensible legal loophole on accrued interest, that allows hedge fund and private equity executives to avoid taxes. Despite near-universal agreement that this is a total scam, even Bill Ackman called him “A stain on the tax code”—and Biden’s Promise to remove itis still with us. The idea that a new wealth tax, desperately opposed by the country’s biggest political donors, could be passed in a divided Congress is a hallucination that not even ChatGPT would propose.
Andreessen and Horowitz are smart enough to know this, so their objections seem paranoid and self-serving. But I think there’s something else, an element that is often cited to explain why some people in Silicon Valley have flocked to Trump: They resent being disliked and even vilified by the media, parts of the “conscious” population, and left-leaning politicians. In Trumpland, their wealth and the wisdom that supposedly goes with it are respected.
Andreessen voices his complaint out loud. He remembers with nostalgia the days when Democrats pandered to his cohort. “They were pro-tech, pro-startups,” he says. “You could make a lot of money and then give it away in philanthropy, and you got enormous recognition for that. And that absolves you of whatever.” He was on that path himself, he says, until critics turned on the billionaires who were giving away their money. His eyes were opened when he saw what happened after Mark Zuckerberg announced his intention to give almost all his money to his foundation; people thought he was doing it for himself, to boost his company’s reputation. What’s the point of giving away all that money, Andreessen seems to say, if you’re not celebrated for it? (Um, to do good? To give back to society all that money you made and paid minimal taxes on?)