The host asks Ben Harrison, founder of Tenacity Venture Capital, to weigh in on Proposition 40, California's proposed wealth tax, amid comments from Mark Cuban, Bill Ackman, Palmer Luckey and Ro Khanna.
Harrison predicts this measure, which he says was orchestrated by a single union, will fail but that a later version backed by more unions will pass, and warns it threatens Silicon Valley's position as the planet's innovation hub.
The host presses on alternatives such as carried interest, Dave Freeberg's idea of higher capital gains rates, 1031 exchanges and borrowing against stock, and Harrison replies that the top 1% already pay 50% of California's tax income.
Harrison says California is a poor steward of money: it blew through a $95 billion one-time surplus and spent $15 billion over 18 years on high-speed rail with zero miles built, while federal spending sits at 24% and debt at $40 trillion.
The two debate cost-cutting, Doge, Medicaid fraud and a roughly doubled defense budget, and Harrison closes by warning that California is pushing out the very people who will create wealth in the coming IPO wave, as many move to Austin, Florida and Nevada.
Brief overview
Ben Harrison argues California's proposed wealth tax would drive innovators away while the state wastes money it already has.
Harrison expects a future wealth tax to passHe says Proposition 40 will fail, but the next version, backed by more unions, will be almost impossible to defeat.
The spending problem, not revenue, is his main complaintHe cites the spent $95 billion surplus and $15 billion on high-speed rail with zero miles built.
Wealth creators are already leaving CaliforniaHe names Austin, Florida and Incline Village, Nevada as destinations just as a large IPO wave approaches.
Questions this recording answers
9 questions, each answered where it is said
Will California's Proposition 40 wealth tax pass?
Ben Harrison of Tenacity Venture Capital says this one won't pass, but the next one probably will. He claims it was orchestrated by only one union, which kept other unions out; once it fails, he expects the other unions to join, making a later version almost impossible to defeat.
Why does Harrison think a wealth tax threatens Silicon Valley?
He says one of his LPs, not a billionaire, worried it would drive innovation and entrepreneurship out of California. Harrison agrees, calling it the first time Silicon Valley's position as the planet's innovation hub has been at threat, through self-inflicted wounds to the ecosystem that feeds most of the economy.
What alternatives to a wealth tax were raised?
The host mentions carried interest, Dave Freeberg's idea of higher capital gains rates closer to income rates, 1031 exchanges and taking loans against stock. Harrison adds a proposal, echoed by Jeff Bezos, that people earning under $100,000 or $150,000 pay no tax at all, which he supports.
How much of California's tax income comes from the top 1%?
Harrison says the top 1% pays 50% of California's tax income. He says he would happily discuss reorganizing taxes if he believed the money would be used well, but argues California is simply not a good steward of taxpayers' money.
What happened to California's $95 billion surplus?
According to Harrison, California had a $95 billion surplus less than five years ago and blew through it and more. He says it was a one-time gain that reset the baseline and was spent as if it were annual, comparing it to hiring 100 extra people after a one-time $100 million bonus.
How much has California spent on high-speed rail?
Harrison says voters approved $33 billion to build high-speed rail, and $15 billion has been spent over 18 years with zero miles of high-speed rail built. He contrasts this with Elon putting a reusable rocket into space, bringing it back and catching it for the same amount of capital.
Why does Harrison say US spending is the real problem?
He says federal spending is now at 24% when it is usually around 20%, while revenue stays at 18 or 19%. With the debate focused on raising taxes and Medicare for all, he sees no genuine push to cut spending, which he says is why the debt reached $40 trillion.
Is the United States at a fiscal breaking point?
Harrison says he does not think so. Discussing a debt level of 270 percent of GDP, as with Japan, he calls that a disaster and says it cannot be accepted as a goal, but it does not mean the US is close to it yet.
Where are wealthy Californians moving?
Harrison says many people he knows have moved to Austin, Florida and Incline Village, Nevada, where he lived for several years. He argues California is driving them out just before the largest creation of wealth through IPOs expected this year and next, which previously produced its surplus.
Key Quote
“So this one won't pass, but the next one probably will.”
— Ben Harrison
Key Quote
“This is the first time that the preeminent position of Silicon Valley as the innovation hub of the planet has been at threat.”