Andreessen talks about the proposal as if Putin himself were invading Atherton, Calif., the elite ZIP code where he lived. until recently. If this tax is imposed, he says, investors will leave the market and innovation will not be funded. “First, you’re killing startups and venture capital. So congratulations, you’re killing the tech industry, basically,” he says. “Second, you’re killing California’s tax base — California is finished!”
But the carnage doesn’t end there, Andreessen says. Once the government gets a taste of this novel tax on the wealthy, it will want more, more, more, until this endangered class of wealthy investors is drained dehydrated. Then the government will go after the wealth of people who are not super-rich but simply very affluent. Sooner or later, we will all be paying wealth taxes! “Presto, chango, we are Argentina!” says Horowitz, and Andreessen is quick to endorse this doomsday scenario.
Before we turn on the soundtrack EvitaLet’s back up for a minute. There’s no evidence that a tax on unrealized gains would put an end to venture capital. If Andreessen and Horowitz were to pull out for tax reasons, others would jump at the chance to play in the lucrative startup lottery—even if, God forbid, they had to pay pre-IPO taxes on the spectacular gains.
But there’s also little reason to believe the tax will ever happen. Biden’s proposal is just that — a proposal. Changing the tax code requires congressional action. Congress would at least address some of the legitimate concerns Andreessen raises, such as the possibility that investor returns could be measured by a short-lived peak in a company’s valuation. But Congress is far more likely to reject it, even if society wants the very wealthy to pay their fair share. Consider the utterly indefensible a loophole in the law on interest on profits, which allows hedge fund fat cats and private equity executives to avoid paying taxes. Despite the almost universal agreement that it is a complete fraud — even Bill Ackman called it “a stain on the tax code” – and Biden I swear I will eliminate itit’s still with us. The idea that a brand novel wealth tax, so desperately opposed by the country’s biggest political donors, would pass a divided Congress is a hallucination that even ChatGPT wouldn’t propose.
Andreessen and Horowitz are clever enough to know this, so their objections seem both paranoid and self-serving. But I think there’s something more going on, an element that’s often cited to explain why some in Silicon Valley have turned to Trump: They’re outraged that the media, parts of the “woke” population, and left-wing politicians are underestimating, even vilifying, them. In Trumpland, their wealth and supposedly the wisdom that comes with it are respected.
In his favor, Andreessen voices this complaint out clamorous. He fondly recalls the days when Democrats pandered to his cohort. “They were pro-tech, they were pro-startup,” he says. “You could make a lot of money and then give it away to philanthropy, and you get a lot of credit for it. And that frees you up for anything.” He went down that path himself, he says, until critics turned against billionaires who gave their money away. He was struck by what happened after Mark Zuckerberg announced his intention to give away almost all of his money to his foundation; people thought he was doing it for himself, to improve the reputation of his company. What’s the point of giving all that money away, Andreessen seems to be saying, if you’re not getting credit for it? (Uh, to do good? To give back to society for all the money you’ve made and paid minimal taxes?)