Silicon Valley’s Case Against The Wealth Tax

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2:04Bradley Tusk:Money market's mad. If money is evil, then that building is hell. The show goes on! The folks in there have watched the show! Show! Welcome to Prof G Markets. I'm Ed Elson. It is May 20th. Let's check in on yesterday's Market Vitals. The major indices ended the day in the red with tech stocks declining ahead of Nvidia's earnings due tonight. Brent crude climbed back above$110 per barrel with no progress on Iran. And the yield on 30-year treasuries hit its highest level since 2007 on long-term energy inflation expectations. Traders are increasingly anticipating a rate hike from the Federal Reserve.

2:44And on CalShare, the odds that we will see a hike this year have climbed to 43%. Okay, what else is happening? Billionaire wealth has more than doubled since 2019, and now voters want to tax it. The 2026 Billionaire Tax Act is officially on the November ballot in California. It would impose a one-time 5 % tax on the assets of Californians worth$1 billion or more. The union backing the measure says the goal is to prevent hospital closures across California and fund state programs, But the proposed tax has drawn fierce opposition. Critics argue that wealth taxes target the people driving investment and job creation and could push them out of the state.

3:28And California is just the start. Senator Bernie Sanders and Congressman Ro Khanna have introduced a federal version that would go even further with a 5 % annual tax on every American billionaire. So we figured that this was a good time to have a discussion about the wealth tax with two people who have thought very hard about it. Today, we are speaking with Jason Calacanis, investor and host of the All In podcast, and also Bradley Tusk, founder and CEO of Tusk Ventures. Jason and Bradley, thank you so much for joining me here on Prof G Markets. Bradley, I'm going to start with you because you've just written about this.

4:09I'd like to just sort of set the stage here. we're talking about taxing billionaires, not just in California, but also across the rest of the nation at a federal level. How do we get here? And when you look at California, what are the chances that you think this will actually go through? Yeah.

4:28Bradley Tusk:I mean, there's, in my view, no question that we have an income inequality problem in the United States. The question is, how do you best go about solving it? And to me, you know, there's half a dozen ideas that are a lot better than a billionaire's tax. And I'm saying this as someone who ran the state of Illinois. I was the deputy governor. I oversaw the state's budget and operations. And so every year I had to figure out how we were going to take in money and then how we were going to distribute it. And I know for a fact that every time that someone like Ed Ellison sent us a dollar in tax revenue, by the time that money reached the people in need, 30, 40 cents on that dollar was gone.

5:08Bradley Tusk:And so, sure, we could make billionaires pay more in taxes, but odds are a lot of that really is just about, you know, further full-time employment for the public sector and public sector unions who are big Democratic donors. And so I do think that people who have more should have to pay more. I don't think that this is the way to do it. But the reason we're here is there is political opportunity in exploiting the anger of people. And you see that from both sides. Trump is a master of that at the right. And people like Sanders are masters on the left. And when you take people's frustrations with their lives and you stoke their anger and you promise them revenge and justice, they will vote for you.

5:52Bradley Tusk:And therefore, the more they vote for you and the more they pay you attention, the more they donate money, the more you do it. And so we're in the self-fulfilling cycle now where both sides are incentivized to be as demagogues as possible. And ideas like billionaires' taxes or whatever else become very popular. In terms of your second question out of will this pass, I'm not sure. So the latest polling that I saw did have it about 50 percent support, 28 percent opposed, and the other 23, whatever it was. undecided. But if you look at Cal State and polling market, it's much more like two to one against.

6:28Bradley Tusk:So that kind of gives you a mixed thing. On a more basic level, on the 30-something years I've spent in politics, the way I would look at this is to say, the average person, when they see the ballot question, is going to say, does this affect me? No. Do I think billionaires should pay more? Yes. Do I want to see health care cut? No. And so that would argue that people will vote for it. However, there were some pretty fatal flaws, whether just out of sort of greed or stupidity by the proponents. And one of them is that it allows the California legislature to expand this to any group they want, as long as it is consistent with the intents and purposes of the referendum, which means that$1.1 billion could fall to$110 million or$11 million or$1.1 million.

7:14Bradley Tusk:Once you're at$1.1 million, that's every homeowner in California pretty much. And so the opposition will have a lot of money to spend. And I think that if they can craft the right message, they can win this thing. But I think it's probably going to be pretty close. Jason, you speak with politicians, lawmakers, and you also speak with many Silicon Valley investors and Silicon Valley billionaires on your podcast and through your investing. What do you make of their reactions? How are they reacting to this? And then what do you think about this California tax? So I think first you have to understand it's not a tax in the traditional sense.

7:56This is a seizure. So they're not just saying, hey, you got to pay 5 % more. If it was, I don't think they would have had any reaction to it. If they said anybody with equities that are valued over this amount or if it was, you know, wealth over a certain amount, nobody would have complained. You might have had some hand-wringing, but generally they've been boiling the frog in New York and in California where people pay over 50%. When I lived there, I paid well over 50%. I think New York's up to 54%. I probably would know. 54, yeah. So people are not complaining too much about that. If they want to opt out of it, they can.

8:35They can move to a no-tax state and save 14%, 15%, 16%. Okay, great. This is, tell me everything in your house, Ed. tell me every painting, tell me every car. Oh, you have the first Model S, what's it worth? Okay, go find somebody to appraise my two classic cars. What are they worth? And then we want 5 % of those. And then what do you have in private companies? So it's a seizure of assets. I've already paid taxes on all of my wealth. And so why am I then having to organize everything, higher auditors. It's just impossible to execute on these. In addition, the way it was written, people who have preferred shares or what's called founder shares, like 10 to 1 super voting rights, would get valued at the voting rights, not the actual asset.

9:28That's why Larry and Sergey Zuckerberg immediately left. Travis has left. David Sachs has left. The list of people leaving is huge. Why? It is incredibly disruptive to have to then go make a list of everything you own and pay 5 % of it. Nobody is upset about paying more taxes. So it's the seizure part. So it's incredibly poorly constructed. The second piece is everybody knows that once you start a tax, you never take it away. It is incredibly hard to get rid of taxes. And if you You smoke cigarettes or you stay in hotels. You see the taxes. They never come down. Nobody's eliminating taxes. In some Republican states, they do lower taxes when they have a windfall or they'll do like a tax moratorium for some period of time if they have a surplus.

10:20Things like universal health care, the minimum wage, there are things that we can do. But this is specifically designed, as Bradley astutely pointed out, to villainize the rich, to villainize successful people. and being a modestly successful person and knowing a lot of people who are extremely successful, they're astute people. And when they hear that you want to put the eye of every socialist lunatic in New York on Ken Griffin's house, or you want to villainize Larry and Sergey, they leave. And it's partially because, well, they know it's going to get worse. They don't want to be in a state where they're not wanted.

11:02And also, it's dangerous. We've now tipped over with the UnitedHealthcare CEO, Brian Thompson, being murdered. Yeah. This is basically politicians like Ro Khanna and others, Mondami in New York, Ernie. They're literally putting targets on people's back. And the target they're putting on their back is this person's successful. And you should hate them for being successful. — Full disclosure, we were going to have Ro Khanna on to discuss this. Unfortunately, I think I'm going to have to step in and play the devil's advocate here. I was hoping that Ro Khanna could do it, but I'm going to do it for him, and hopefully we'll have Ro on another time and we can discuss this.

11:41I think one response to your points, Jason, would be that there is this question of, would it be effective? The idea of, can you appraise everyone's assets and do that every year and count up how much your art is worth and your cars and your private companies? And would you do all of that? And does that make sense? Is it possible? There are very, very big questions there. But it does seem that in a lot of ways, it seems like the very richest, the centimillionaires, the billionaires, in a way, I think a lot of people would say that that is an excuse in order to not be taxed properly. And the things that people would point to in terms of the reason that you need something like this, the reason that you would need something quite dramatic, is the fact that wealth inequality has gotten, some would say, way out of control.

12:29The top 19 households owning 2 % of all the household wealth, up from 0.1 % just around 20 to 30 years ago. The fact that the top 1 % owns more of the household wealth in America than the entire middle class, that wasn't true 30 years ago. There are things that have changed here, And it seems as though this, while it might not be the most effective or easiest way to do it, to Bradley's point, this is something. And then when we propose something, then suddenly the billionaires say, this isn't fair, I don't like this, I'm out of here. Some would say, maybe you just don't want to pay taxes. What would you say to that argument?

13:10Well, I want to let Bradley get in here, but I'll answer it as quickly as I can. I don't want to monopolize the time. But what I would say is if you think there's a better way to tax, then we should do that as opposed to villainizing folks and doing something completely impractical that's unconstitutional. I actually have some recommendations here. And as a free market capitalist myself, I've invested in 700 companies. Some of them have gotten very big. And I invest in 100 new companies a year. I do This Week in Startups. I've done 2 ,500 episodes where I interview startups. I'm a fan of entrepreneurship.

13:42It is the greatest force for change in the world. there's very simple things you can do. You can look at something like... Sorry, just, Jason, because I would like to get to solutions. I think it's important. I just want to understand where you stand on this. Do you believe that billionaires, that the richest in our society, that there should be more redistribution, that there should be more taxation, that they should be paying more in taxes just generally? So the short answer is yes. And the reason is capital gains has not anticipated the concept of capital gains, which we want. We want people to be investing.

14:19It wasn't really designed for people to have large amounts of wealth and to be able to set up margin loans. Anybody who's got more than$10 or$20 million can just set up a low-interest margin loan for people who don't understand what that is. It's essentially like a credit line you might have against your home, like a home equity line, except it's against your stocks. And you can just draw down from it, pay it back. And if your stocks are growing more than 10 % a year, 6%, 7%, 8%, 9%, 10 % a year, and your margin alone is, mine was as low as 2%, which is essentially free money. Now it's maybe more like 5%, but which is still kind of free money.

14:58You know, that is an actual loophole. And people will just keep drawing down on their margin and their equities keep going up. Very simple solution to all this is to look at capital gains and income tax and find something in the middle where we move to sort of a flat tax. And then when you take out and you originate a margin loan, you could put a tax on it. So let's say you had$10 million in net worth. You had$2 million margin loan just to make this easy. You could pay the capital gains on that$2 million margin loan or pay half of them. And then if you pay the margin loan back, you would get the credit for the tax in the future.

15:32Very simple solution. And then finally, I'll just say, I think we should really have a conversation about minimum wage in this country, which I didn't used to think, but my thinking on it's evolved. But I'll let Bradley jump in here. Yeah, Bradley. So two suggestions there. It sounds like Jason's advocating for maybe equalized capital gains versus income tax, also some sort of borrowing tax. What do you make of Jason's thoughts and what do you agree with or disagree with?

15:54Bradley Tusk:Yeah, I mean, I think those are both good ideas. is, but let's take a half a step back if that's okay, which is if you take your devil's advocate position, the question is, what are you solving for, right? So there are two different things. One would be giving people who have less more, and the other would be promoting a concept of fairness. And I would say these two things are at the moment not linked together. So for example, In New York City in 2012, we had 12.7 percent of America's millionaires. In 2022, after tax increases, a really bad way to handle COVID, excoriation of people who are successful, more regulations, everything else, that fell to 8.7 percent.

16:39Bradley Tusk:And I'm sorry, millionaires, not billionaires. the resulting differential in money for New York City's and state budget was$13 billion a year in less tax revenues. If you take Mondami and all of his ideas and all of his plans and his deficit, all of it would have been funded if we had just maintained our percentage of millionaires. And this is why jurisdictional tax increases tend to not work particularly well, because as Jason said, people can move. People have been moving already. And then if you are a poor person, right, and you need public housing, you need Medicaid, you need food stamps, you don't care about social justice.

17:18Bradley Tusk:You care about the money being there on the budget to provide you with these things. So if California, which I believe it would at the conclusion of if they do an access tax or New York right now has less money to be able to help the poor, then you're not solving for the problem of inequality. You might be solving to make people who are upper middle class and highly progressive feel better emotionally because they feel like now the people who did better than them are being justly punished. I don't care about their emotional state or needs. I care about helping poor people. So the two ideas Jason threw out there, I think, are good ones.

17:53Bradley Tusk:I'll throw some more out there. I think that universal basic income, where you give someone a dollar, is a lot more effective than a system of taxation and then appropriation. Now, you need taxation and you need government for things that require collective action, a military, a hospital, building a road, things like that. But most social services, to me, would be unnecessary and you could make government smaller, you could reduce that part of the tax burden and instead direct that money and more into a system of a direct wealth transfer where if people need money for rent or food or clothes for their kids or whatever it is, They would get it.

18:32Bradley Tusk:And by the way, let me give you a couple of ideas of which I'm an independent at this point. So to Jason's point, I left the Democratic Party about 15 years ago. So I have ideas that offend both sides. Right. So I think you have basic income. I think Bernie was right about Medicare for all. It is a successful government program, and there's no reason not to let more people have access to it if they want. You should still have private insurance as an option as well. I think we need to take things that would really make life more affordable. That includes tort reform. We have$367 billion a year spent on frivolous lawsuits.

19:02Bradley Tusk:That results in all of us having higher insurance premiums. I think you need a lot more affordable housing. And as a result, that means taking a lot of the sort of, you know, sacred cows of the left. You sound like you're running, Bradley. No, I'm not. But I certainly have a platform if I ever did. Yes, you do. Like endless environmental review, endless community review, having to use unions to build everything. and not doing that. Bradley makes a very good point, though, about people moving and geography. This is the truth in today's era. The people who are on the top half who are business owners and who have equities are running away with it.

19:37The people on the bottom half of society who don't own equities are stalled because America is the greatest wealth creation machine in the world. Our equities are phenomenal. That's the win of America. So instead of talking about how do we take more money from the rich, we should be really concentrating on how do we get rid of waste, which is about 30 % of all these budgets we found out? And then number two, how can we look at the systematic things that people in the lower half, non-equity holders, how do we make them equity holders? That's what this Trump accounts, America, USA accounts, they'll handle that.

20:14That's going to take a 20, that's a 20-year story. So we close that gap from kids up, and then we have the rich. So what do you do with the people in between, I've been studying minimum wage. And, you know, I travel all over the world and in New Zealand, Australia, the Nordics, it's 15 to 20 bucks, you know, in US dollars as high as 20 to 25 dollars. I think Switzerland or Norway might be the leader right now in the low 20s. In America, it's still federally seven and in different locations, it's 15 to 18 dollars, There's Portland, Seattle, San Francisco, New York, et cetera. We really should be looking at that because when they raised the rates in those other countries, there was a lot of hand-wringing that it would have a negative impact on employment and it would have a negative impact on the economy.

20:59And what the study showed in those markets – and they're not perfectly analogous, but they're worth studying and considering. And I'm not finalized in my thoughts on this. But it turned out there was no discernible increase in the cost of goods. like added 50 cents to a cup of coffee or a dollar to a hamburger. In other words, it was no big deal. You got rid of tipping because people had a livable wage. And then what happened for the companies, because everybody did it in unison, they were forced to do it because of regulations. We had more customers who could afford to go to Starbucks and buy a$5 coffee or could afford to buy the next pair of Nikes.

21:35So you actually take the, if you were in the bottom half of society, if you make under$100 ,000 a year, you're probably saving zero. except for mandatory savings like Social Security. You're saving zero. So you spend it all. So then you just make more consumers, which is good for the rich people, and you get the virtuous cycle going. And it's really like, if I say on all in, I'm for reassessing the minimum wage, oh, you're a libtard, whatever. I'm a moderate independent. Every time I bring this up, rich people have a very dogmatic approach to this. Minimum wage has to be free market. It doesn't.

22:10It doesn't. It isn't right now. And so what would it kill society to try raising it$1 a year for five years, to go from$7 to$12? I can tell you, none of these motherfuckers would last a week making$7 an hour or$15 an hour. Because they'd be taking Uber Black and ordering DoorDash and spending$150 for their lunch and to commute. So I think that's where we need to spend our cycles. Stay tuned for more of this panel right after the break. And by the way, I'm going to be going live on Substack today at 12.30 Eastern. So if you want to see that, head to ProfGmedia.com and subscribe to ProfG+. It'll only be for ProfG+.

22:53members. I hope to see you on the stream.

23:02Bradley Tusk:Support for the show comes from Amazon. There are the things you can plan for. A first birthday party, a movie marathon, a renter-friendly bathroom reno. And then there are the things you can never plan for. A surprise rainstorm, a Blu-ray player calling it quits, stick-on tiles that looked way better on the package. For all things planned and unplanned, Amazon has you covered. You'll find low prices on everyday essentials and last-minute lifesavers. Shop Amazon and save on essentials. Save the everyday. Tomorrow morning is knocking. Stock your fridge now. How about a creamy mocha frappuccino drink?

23:45Bradley Tusk:Or a sweet vanilla? Smooth caramel, maybe. Or a white chocolate mocha. Whichever you choose, delicious coffee awaits. Find Starbucks frappuccino drinks wherever you buy your groceries. Where is Daredevil? I'm right here. Don't miss the return of Marvel Television's Daredevil Born Again. So what's next? I've been liberated. We're going to take this city back. In an all-new season, now streaming only on Disney+. They're hunting us. It's time we started hunting them. I can work with them. This should be tons of fun. Marvel Television's Daredevil, born again, now streaming only on Disney+.

24:29We're back with Prof G Markets. Jason, your point that when you suggest raising the minimum wage and then you're immediately dubbed as a libtard, gets to something important here, which is that a lot of people would say that the same thing could be said for, one, the wealth tax, but we could go a step further and say, you know, for example, Zoran Mamdani's recent Pierre-Atex tax proposal, which, you know, a lot of people have been making the point where if you raise taxes, then they'll leave. And then Mamdani says, well, why don't we tax people who have already left? This is their second home.