Andreessen talks about the proposal as if it were Putin himself invading Atherton, California, the elite zip code where he resided until recently. If this tax is imposed, he says, investors will exit the market and innovations won’t be funded. “Number one, you kill startups and venture capital. So congratulations, you kill the technology industry, essentially,” he says. “Number two, you kill the California tax base—California is 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 will be sucked dry. Then the government will go after the wealth of people who aren’t super rich but merely very rich. Sooner or later, we’ll all be paying wealth taxes! “Presto, chango, we’re Argentina!” says Horowitz, with Andreessen quickly seconding this doom scenario.
Before we cue up the soundtrack to Evita, let’s back up a minute. There’s no evidence that a tax on unrealized gains would end venture capital. If Andreessen and Horowitz packed it in for tax purposes, others would jump at the chance to play the lucrative startup lottery—even if, god forbid, they had to pay some taxes pre-IPO on spectacular gains.
But there’s also little reason to think this tax will happen at all. The Biden 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 that Andreessen raises, like the possibility that an investor gain might be measured in a temporary peak of a company’s valuation. But it’s much more likely that Congress will reject this, even if the public wants to see the very wealthy pay their due. Consider the totally indefensible carried interest loophole, which allows fat-cat hedge fund and private equity executives to escape taxes. Despite near-universal agreement that this is a total scam—even Bill Ackman called it “a stain on the tax code”—and Biden’s vow to eliminate it, it’s still with us. The idea that a brand-new wealth tax desperately opposed by the nation’s biggest political donors will get through a divided Congress is a hallucination that even ChatGPT wouldn’t propose.
Andreessen and Horowitz are smart enough to know this, so their objections come off as both paranoid and self-interested. But I think there’s something more happening, an element that’s often cited to explain why some Silicon Valley people have turned to Trump: They resent how the media, some of the “woke” population, and left-leaning politicians don’t appreciate them, and even vilify them. In Trumpland, their wealth and the wisdom supposedly associated with it is respected.
To his credit, Andreessen expresses this grievance out loud. He fondly looks back to the days when Democrats catered to his cohort. “They were pro-tech, they were pro-startup,” he says. “You could make a lot of money, and then you give the money away in philanthropy, and you get enormous credit for that. And it absolves you of, whatever.” He was on that path himself, he says, until critics turned on billionaires who were giving away their money. His eyes opened when he saw what happened after Mark Zuckerberg announced his intent to give away 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 all that money away, Andreessen seems to be saying, if you aren’t celebrated for it? (Um, to do good? To pay society back for all that money you made and paid minimal taxes on?)