Andreessen talks about the proposal as if Putin himself were invading Atherton, California, the elite zip code where he lived until recently. If this tax is imposed, he says, investors will leave the market and innovations will not be funded. “Number one, you’re killing startups and venture capital. So congratulations, you’re killing the tech industry, essentially,” he says. “Number two, you’re killing California’s tax base — California’s done!”
But the carnage doesn't stop there, says Andreessen. Once the government gets a taste of this new tax on the rich, it will want more, more, more, until eventually this endangered class of wealthy investors is sucked dry. Then the government will go after the wealth of people who aren't super rich, just very rich. Sooner or later, we'll all be paying wealth taxes! “Presto, chango, we're Argentina!” says Horowitz, to which Andreessen quickly agrees with this doomsday scenario.
Before we put on the soundtrack EvitaLet’s back up a bit. There’s no evidence that a tax on unrealized gains would end venture capital. If Andreessen and Horowitz gave up for tax purposes, others would jump at the chance to play the lucrative startup lottery, even if, God forbid, they had to pay taxes on spectacular gains before they went public.
But there’s also little reason to think this tax will ever pass. Biden’s proposal is just that: a proposal. Changing the tax code would require congressional action. Congress would at least address some of the reasonable concerns Andreessen raises, such as the possibility that an investor’s gains could be measured in a temporary spike in a company’s valuation. But it’s far more likely that Congress would reject it, even if the public wants the very wealthy to pay their dues. Consider the utterly indefensible carried interest loophole that allows wealthy hedge funds and private equity managers to avoid paying taxes. Despite near-universal agreement that it’s a total fraud—even Bill Ackman called it “a stain on the tax code”—and Biden’s promise to repeal it, it’s still with us. The idea that a brand-new wealth tax that the country’s biggest political donors desperately oppose could pass a divided Congress is a hallucination that even ChatGPT wouldn’t imagine.
Andreessen and Horowitz are smart enough to know this, so their objections come across as paranoid and self-serving. But I think there’s more to it than that, an element often cited to explain why some Silicon Valley people have turned to Trump: They resent the fact that the media, some of the “woke” population, and left-wing politicians don’t like them and even vilify them. In Trumpland, their wealth and the wisdom that supposedly comes with it are respected.
Andreessen voices this complaint out loud, something close to his heart. He looks back with nostalgia on the days when Democrats targeted his fellow man. “They were pro-tech, pro-startup,” he says. “You could make a lot of money, and then you give it away to philanthropy, and you get a tremendous amount of credit for it. And it absolves you of, like, whatever.” He was on that path himself, he says, until critics turned on billionaires who gave away their money. His eyes were opened to what happened after Mark Zuckerberg announced he would donate nearly all of 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 be saying, if you’re not going to get praise for it? (Um, to do good? To pay society back for all that money you made and paid minimal taxes on?)
