E30: Ramifications of Biden's proposed capital gains tax hike, federal budget, India's COVID surge, founder psychology & more

**Jason Calacanis** (0:00)
Shout out to a company, Sacks and I.

**Chamath Palihapitiya** (0:04)
What the hell are you doing? Beat that shit out.

**Jason Calacanis** (0:14)
I just wanted to give a founder a plug.

**David Friedberg** (0:17)
What the fuck?

**Chamath Palihapitiya** (0:18)
Despite how tired I am, I've woken up now. Now I'm awake. You've awakened the jet.

**David Friedberg** (0:22)
I'm done. I quit.

**David Sacks** (0:23)
I'll give a shout out to RIP which just got acquired by RIP.

**Jason Calacanis** (0:49)
Hey everybody, welcome to the All-In Podcast. I'm Jason Calacanis with us today.
The rain man himself calling in from an undisclosed location, the Queen of Kin Wands, and of course, the dictator himself, Chamath Palihapitiya. All right, boys. How are we doing?

**David Friedberg** (1:06)
Feel flow energy today. What's going on?

**Chamath Palihapitiya** (1:08)
Great. How are you?

**David Friedberg** (1:09)
What's going on?

**Chamath Palihapitiya** (1:09)
Let's go. Let's do this.
I love it. Let's go.

**Jason Calacanis** (1:15)
All right. You're hot. You're coming in hot. Yeah. Breaking news. Breaking news, Biden has announced his capital gains tax hike. I don't think this impacts any of us, but Biden will propose almost doubling the capital gains tax rate for wealthy individuals from 20% to not 25, not 28, 39.6% to help pay for the social spending and in equality. For those earning $1 million or more, so nobody on this call, federal tax rates could be as high as 43.4%. The capital gains increase would raise $370 billion over a decade, yada, yada. For New Yorkers, the combined state and federal capital gains rate could be as high as 52.22%.
And Californians, 56.7%. Biden has previously warned that those earning over $400,000 can expect to pay more in taxes.
This was just breaking news a couple of hours before we started the pod and the stock market is down and people are freaking out.

**David Sacks** (2:25)
Well, J Cal, I want to hear your take on this actually.

**Jason Calacanis** (2:31)
Why didn't you tell me Biden was going to do this?

**David Sacks** (2:36)
J Cal was ranting on this topic 15 minutes ago. We were talking and I'm like, dummy, what did you think was going to happen?
He's saying they're going off. He's saying they're going off. It's like, what did you expect?

**David Friedberg** (2:49)
Just before we get into it, we should do a quick primer on what this means, right? So capital gains taxes are the taxes you pay when you make an investment and you sell that investment at a profit.
You pay a tax on the profit you make. And there's a difference between capital gains on the short term, which means less than one year, and long term, which means you've had the investment for more than a year. So economic policy historically has dictated that having a low capital gains tax rate relative to what an income tax rate might make might be incentivizes people to make long term investments. And it gets more money moving in the economy. And as a result, the economy will grow. And so the idea of increasing the long term capital gains tax from 20%, which it currently is to 40% is a real striking economic policy shift rationalized as we're going to save, we're going to use this money for social spending. But I think the historical context and what this is, is really important as we get into the conversation.
And just speaking historically, the maximum tax rate and long term capital gains got up to 40%. Sacks, you probably have the history on this in 1978 for a year, right? Or like 76 to 78 And then it's been largely 15 to 20% for the last 20 years or so.
And so to jump up, and prior to that in the early part of the 20th century, it was like 25% pretty consistently for a long time. So to jump up to 40% is a really big shift. And there's a lot of debate around the economic implications of doing this. I thought that was important. Yeah.

**Chamath Palihapitiya** (4:21)
Let's take a step back and actually see the forest from the trees. And the forest from the trees is that I don't think Biden thinks that it's a credible plan in as much as I probably think he needs, you know, this is like it's performative, because it was a lot larger, the number, the headline number was a lot larger than what people were whispering was going to be the number, right? It was supposed to be like in the low 30s, or maybe kind of like, you know, 33, 34
And then all of a sudden, like to come out of 39.6, I think it's almost like, okay, he's giving the pound of flesh to the left, kind of like woke mob of the Democratic Party, who probably doesn't understand how capitalism works in the first place and doesn't care because they're not they're not participants in it. Now, my reaction is, I don't think it's going to pass, I think it's going to be really tough to get done. And I think it probably, you know, maybe maybe there's a watered down version, but this version, I'm not super worried about. And then it just comes back to the same thing over and over.