Silicon Valley’s Wealthy Whine: The Outrage Over a Potential Tax on Unrealized Gains
Silicon Valley’s tech titans are up in arms. The proposed tax on unrealized capital gains, a measure aimed at addressing the vast wealth inequality in the United States, has sparked a wave of outrage among venture capitalists and billionaires like Marc Andreessen and Ben Horowitz. They paint a picture of impending doom, arguing that such a tax would be the death knell for innovation and the Californian economy, leading to an Argentina-like economic collapse. But are their claims grounded in reality, or is this just a desperate attempt to protect their own wealth?
Andreessen, a venture capitalist who famously lives in the exclusive community of Atherton, California, describes the proposal as an invasion. "If this tax is imposed," he declares, "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. Number two, you kill the California tax base—California is done!’"
Horowitz, Andreessen’s business partner, echoes this sentiment, adding that the government’s appetite for wealth taxes will only grow, eventually sucking dry even those who are "merely very rich." "Presto, chango, we’re Argentina!" he proclaims, invoking a nation synonymous with economic instability.
However, their apocalyptic pronouncements appear to be exaggerated. There’s no proof that taxing unrealized gains would kill venture capital. If Andreessen and Horowitz were to walk away from the venture capital world, others would readily take their place, enticed by the lucrative opportunity to participate in the ever-growing startup ecosystem. Even with the potential for pre-IPO taxation, the promise of substantial returns would likely outweigh the tax burden for many investors.
Moreover, the Biden proposal remains just that – a proposal. Whether it becomes law requires congressional action and approval. It’s likely that the congressional process would address some of the concerns raised by Andreessen and others, such as the challenges of measuring gains based on fluctuating valuations. But even if the public demands a fairer distribution of wealth and support the tax, it’s highly improbable that it will pass a Congress that is often beholden to the very wealthy individuals opposing it. The persistence of the carried interest loophole, which allows hedge fund and private equity executives to avoid taxes on their lucrative returns, despite widespread criticism and calls for its elimination, illustrates the power and sway these wealthy interests wield in the political arena.
The outrage expressed by Andreessen and Horowitz may stem from a deeper sentiment. While they articulate their concerns in purely economic terms, there’s a palpable sense of resentment at the perceived lack of appreciation for their wealth and the critical scrutiny they face from the public and the media. They seem to be longing for a return to their perceived golden days, a time when their wealth was unchallenged, even celebrated, and their philanthropy was widely lauded as a means to atone for their success.
Andreessen candidly shares this sentiment, reminiscing about the "pro-tech" days when the Democratic Party embraced their industry, celebrating their wealth and accepting their philanthropic gestures as a means to maintain a good public image. "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 says.
However, the times have changed. The public is increasingly aware of the widening wealth gap and the disproportionate impact of tax policies that favor the wealthy. The era of uncritical admiration for the tech elite has waned, replaced by a growing skepticism that challenges their narratives and scrutinizes their actions. This scrutiny, Andreessen laments, has even cast doubt on the motives of philanthropic endeavors, as illustrated by the reaction to Mark Zuckerberg’s commitment to donate his wealth. "People thought he was doing it for himself, to boost his company’s reputation," Andreessen notes. This perception, he seems to suggest, negates the very essence of his philanthropic intentions.
However, the sentiment that philanthropy, in itself, negates the consequences of accumulated wealth is a dangerous and self-serving argument. While philanthropic efforts can be beneficial, they cannot be used to absolve the wealthy from addressing the inequities that their wealth often exacerbates. Ignoring the societal consequences of wealth inequality simply because a few billionaires donate a portion of their fortune is akin to ignoring the environmental damage of a polluting factory because the owner funds a local park. The inherent power dynamics that contribute to such inequalities remain untouched.
The outcry from Silicon Valley’s wealthiest individuals over a potential tax on unrealized gains should be seen as more than just a defense of their personal fortunes. It’s a reflection of a changing social landscape, where the privileged are increasingly facing scrutiny and public disapproval of their wealth and its potential influence on public policy. Their outrage over a potential tax serves as a reminder of the immense power they possess and their reluctance to relinquish any part of their accumulated wealth, even as it grows more out of proportion to the vast majority of the population.
Ultimately, the debate surrounding the proposed tax on unrealized gains transcends the narrow focus on its potential economic impacts. It serves as a microcosm of a broader societal conversation about wealth inequality, the role of public policy in addressing this disparity, and the responsibility of those who accrue immense wealth to acknowledge the impact of their wealth on the collective well-being. As the tech industry continues to expand its influence, it remains crucial to critically examine the narratives promoted by its most powerful actors, to evaluate whether they are driven by genuine concern for societal welfare or self-preservation.
