Silicon Valley is abuzz with anxiety over a tax proposal doing the rounds, whether it’s billed as part of Kamala Harris’ economic plan or simply a continuation of Joe Biden’s. The specific tax plan in question is a tax on unrealized capital gains, and it’s causing a lot of angst among the tech elite, according to Dan Primack, Axios’ business editor.
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What’s so special about it?
The idea behind this tax is quite simple: it targets the super-rich – those with more than $100 million in assets – by taxing the profits on their investments before they sell them.
Normally, people are only taxed on their investments, like stocks, if they sell them for a profit. But this proposal would change that, allowing billionaires like Elon Musk, Warren Buffett and Jeff Bezos to pay taxes on the increased value of their assets, even if they haven’t sold anything.
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Some believe that taxing unrealized profits could harm innovation by punishing people who hold on to their shares in the companies they built. Venture capitalist Marc Andreessen, for example, warns that this kind of tax could make it nearly impossible for new startups to succeed.
“Venture capital just stops. Companies like ours don’t exist,” Andreessen said in a podcast. “Why on earth would someone do this instead of going to Google and getting a bunch of cash every year?”
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The concern is that this tax could take a significant chunk of money out of the pockets of those actively building and growing new tech companies. For a place like Silicon Valley, where success is often measured in stock options and equity, this could be a game-changer — and not in a good way.
Critics of the current tax system point out that billionaires often play by a different set of rules. They can borrow money against the value of their stocks without having to sell them, meaning they don’t pay taxes on that value. This loophole allows them to access vast sums of money tax-free, while the rest of us pay taxes on our income.
But as Andy Blocker, Global Head of Public Policy and Strategic Partnerships at Invesco, said, Harris “will need to have full control of Congress, the House of Representatives and the Senate to implement” her plan.
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The counterattack
A tax on unrealized profits is IMPOSSIBLE to pass. A candidate just proposed it. Only two possibilities:
1) The candidate is too stupid to understand this.
2) The candidate (and party) thought his voters were too stupid to understand this.— Pierre Ferragu (@p_ferragu) August 21, 2024
Not surprisingly, many in the financial community are fiercely opposed to the idea. Tom Lee, a top Wall Street strategist, called it a “very unstable tax policy” that could discourage long-term investment. Others, such as Pierre Ferragu of New Street Research, went so far as to call the proposal “stupid” and argued that it would be nearly impossible to implement fairly.
Even some of Harris’ wealthy campaign donors are reportedly uncomfortable with the plan and are urging her to drop it from her platform, underscoring how controversial the tax is, even among those who support Democratic policies.
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This article Harris’ or Biden’s economic plan? It doesn’t matter. Silicon Valley ‘Freaked Out’ Over Unrealized Capital Gains Tax Plan originally appeared on Benzinga.com
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