Vox spoke to venture capitalists Andreessen and Horowitz, who argued that it would stifle the startup ecosystem in Silicon Valley. They’re not alone in this concern; finance and tech circles have been buzzing with similar inhibitions since the plan was introduced in 2022.

What is Biden’s intention of taxing the super rich ?

The Billionaires Minimum Income Tax, despite its controversy, aims to address a significant issue in how the U.S. taxes capital gains—profits made from selling assets like stocks or real estate. Under the current system, these gains are only taxed when realized, meaning billionaires can hold onto their assets and defer paying taxes indefinitely. This is like getting a zero-interest loan from the government just by waiting to sell.

This “realization requirement” allows the wealthy to avoid taxes on their growing fortunes, which seems unfair to those who can’t afford to wait and must sell assets sooner. It also hinders economic growth by locking up capital that could be invested in new ventures. To make matters worse, if these assets are passed on to heirs, they can escape capital gains tax altogether thanks to a loophole known as “step-up in basis,” or more colourfully called, the “angel of death loophole.”

Biden’s proposed tax aims to eliminate this loophole for the super-rich, taxing gains as they occur, regardless of whether the assets are sold. For those concerned about cash flow—like startup founders who might be billionaires on paper but lack liquid assets—the plan includes provisions to defer taxes until the assets are sold or the company goes public.

Billionaire tax may not see light of day

Given the Republican-controlled US House and internal opposition within the Democratic Party, the Billionaires Minimum Income Tax is unlikely to become law. Even a more modest proposal to close the “angel of death loophole” failed to pass when Democrats had a slim majority in Congress. Former Senator Heidi Heitkamp (D-ND) argued, without evidence, that taxing unrealized gains at death would devastate family farms, successfully stalling the proposal.

Nevertheless, there are still ways Congress could increase taxes on the wealthiest Americans without stifling innovation. Options include taxing the loans billionaires use to access cash without selling assets or implementing deferral charges on unpaid capital gains taxes.