Silicon Valley is buzzing with concern over a tax proposal making the rounds, whether it’s labeled as part of Kamala Harris’ economic plan or just 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 anxiety among the tech elite, according to Dan Primack, Axios business editor.
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What’s the Big Deal?
The idea behind this tax is pretty straightforward: it targets the ultrawealthy – those with more than $100 million in assets – by taxing the gains on their investments before they sell them.
Typically, people are only taxed on their investments, like stocks, when they sell them for a profit. But this proposal would change that, making billionaires like Elon Musk, Warren Buffett and Jeff Bezos pay taxes on the increased value of their holdings even if they haven’t sold anything.
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Some believe that taxing unrealized gains could hurt innovation by penalizing people who keep their shares in the companies they’ve 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 ends. Firms like ours don’t exist,” Andreessen said on a podcast. “Why on earth is anybody going to go do this versus going to Google and getting paid a lot of money every year in cash?”
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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 get to play by different rules. They can borrow money against the value of their stocks without having to sell them, which means they don’t pay taxes on that value. This loophole allows them to access huge sums of money tax-free while the rest of us are taxed on our income.
However, as Andy Blocker, the Global Head of Public Policy and Strategic Partnerships at Invesco, said, Harris is “going to have to have full control of Congress, the House and Senate to enact” her plan.
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The Pushback
A tax on unrealized gains is IMPOSSIBLE to implement. A candidate just proposed it. Only two possibilities:
1) Said candidate too dumb to understand this.
2) Said candidate (and party) considering their voters too dumb to understand this.— Pierre Ferragu (@p_ferragu) August 21, 2024
Unsurprisingly, many in the financial world are strongly opposing this idea. Tom Lee, a top Wall Street strategist, called it a “very unstable tax policy” that could discourage long-term investments. Others, like Pierre Ferragu of New Street Research, went so far as to call the proposal “dumb,” arguing that it’s 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. This shows 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’s ‘Freaked Out’ By Unrealized Capital Gains Tax Plan originally appeared on Benzinga.com
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Source: finance.yahoo.com