The battle over a proposed wealth tax has triggered what could be the first competitive race in a decade for a Silicon Valley congressional district, as a coalition of tech leaders has anointed a challenger to unseat Democratic Rep. Ro Khanna.
Ethan Agarwal is a newcomer to politics and a fellow Democrat who briefly mounted a campaign for governor last year. A former supporter of the congressman, the 40-year-old tech entrepreneur argues that he’s lost touch with the needs of the district.
Khanna’s support of a one-time tax on California’s billionaires was the “straw that broke the camel’s back,” according to Sonoma State University Political Science Professor David McCuan, propelling Agarwal to jump into the race last month.
Khanna, 49, has yet to face a serious challenger since ousting former Democratic Rep. Mike Honda in 2016 — his second attempt to do so. Since then, he’s handily won each of his reelection bids with 67% to 75% of the vote. If Agarwal’s tech backers — like Y Combinator CEO Garry Tan and angel investor Ron Conway — pour money into his efforts, Khanna could face his biggest contest yet.
“It is really difficult to defeat an incumbent,” McCuan said. “But you see individuals who are well-heeled, backed by a number of venture capital dollars combined with Big Tech dollars, you see those candidates running throughout the country and especially in Northern California.”
The challenge against Khanna is unusual: Incumbent Reps. Sam Liccardo, Zoe Lofgren, Kevin Mullin and Jimmy Panetta in neighboring districts aren’t facing well-resourced opponents from within the Democratic party.
When Khanna first launched onto the political scene more than a decade ago, the donors who rallied around him read like a who’s who of Silicon Valley’s booming tech industry — deep-pocketed investors and executives keen on the young attorney’s vision of harnessing the Valley’s innovation. But McCuan said that relationship has “matured and changed” as he’s sought to elevate his national profile on the progressive left.
At the same time, the tech industry has employed an “all-hands-on-deck” approach in recent years, transitioning from playing defense to getting out ahead of regulations and policies, McCuan said.
The relationship that helped Khanna unseat a beloved eight-term incumbent in 2016 showed signs that it might have soured last December as the congressman waded into California’s politically-charged wealth tax debate.
“I will miss them very much,” Khanna wrote in a sarcastic social media quip in response to news that the tax was driving Google cofounder Larry Page and venture capitalist Peter Thiel out of the state.
His support prompted online backlash from blue-check-marked posters on X who listed themselves as CEOs, founders or investors in their bios — many of whom are now rallying around Agarwal.
The entrepreneur doesn’t necessarily reject the premise of taxing the wealthy, but argues there are better ways to go about it, such as increasing the capital gains tax or upping property taxes for investment properties.
The tax, which would impose a one-time 5% tax on the net worth of billionaires in the state, has triggered an onslaught of spending and counterproposals by a group of Bay Area billionaires to stop it. The proposed tax, backed by a health care union, has yet to qualify for the November ballot. It’s drawn opposition from others outside the tech industry, including Gov. Gavin Newsom, who has argued that it will hurt the state’s economy.
The 17th congressional district is uniquely positioned to be a sort of battleground for a debate over whether the state’s most affluent residents should pay more in taxes. The district, which spans parts of Alameda and Santa Clara counties, is the wealthiest congressional district in the country, according to U.S. Census data. It’s home to some of the world’s richest companies, including NVIDIA, Apple and Intel, and boasts a median annual household income of upwards of $181,000. But there’s also massive wealth inequality — more than 6% of residents, many of them children, fall below the poverty line. And it’s solidly blue, voting nearly 67% for Democrat Kamala Harris for president over Republican Donald Trump in 2024.
Khanna, a rising star whose name has already appeared on 2028 presidential polls, doesn’t make much of the online criticism that’s stemmed from his December post — “Twitter is not real life,” he said in an interview with The Mercury News. The congressman maintains that he still has “tremendous support” from business and tech leaders who actually live in the district.
“I would say it’s not that my views have changed, it’s that there’s been a move to the right by some of these MAGA folks who have abandoned some of the values that used to animate the Valley,” he said, referring to Trump’s “Make America Great Again” backers.
Khanna says his support of higher taxes on billionaires is nothing new, and there needs to be what he calls a “new tech social contract” where a tax on the wealthy helps fund services like health care, child care and education.
He believes the recent ire from tech leaders is because of his work with Rep. Thomas Massie, a Kentucky Republican, to pry loose files related to the late convicted sex offender Jeffrey Epstein.
“There are prominent tech folks in those files, and I knew when I was taking on that fight with Massie that I would be upsetting a number of big Democratic donors, I’d be upsetting people in tech who I knew were going to be mentioned in those files,” he said. “There’s a reason those files haven’t come out for 20 years.”
Agarwal has made many of the same arguments that Khanna did a decade ago in pursuit of Honda’s seat, contending that the current representative was out of touch with the needs of the district. While he recognizes that a lot of the tech community is backing him, he isn’t counting on their support alone.
“The way to win this race has nothing to do with the backing of Gary Tan,” Agarwal said of the Y Combinator CEO who recently launched a nonprofit to support “common-sense policies.” “The way to win this race is to listen to people and to be their representative and to physically be in the district.”
The congressional hopeful was born in Canada, but moved to the United States as a child, growing up in the nearby communities of Saratoga and Los Gatos. He founded two tech companies over the course of a decade, selling the last one about 12 months ago as he prepared to venture into politics.
Agarwal has branded the congressman as “Trader Ro,” a reference to Khanna’s prolific stock trading — he had the third-highest trading volume in Congress last year, according to the good government nonprofit Common Cause. If elected, Agarwal said he wants to ban congressional stock trading and would divest his own portfolio on day one. He lists eradicating childhood poverty, improving public transportation and lowering health care costs among his other top priorities.
But Agarwal faces a tough uphill battle in trying to unseat a popular incumbent. His first test will be the June 2 primary, where he’ll need to garner enough votes to be one of the top two candidates, regardless of political party, to move on to the November runoff. Two other candidates are also in the race — cybersecurity engineer Mike Katz, a Democrat, and Ritesh Tandon, an entrepreneur and the sole Republican in the race. Neither of them has the financial backing close to Khanna’s or even Agarwal’s campaigns, which helps signal candidate viability.
Agarwal has raised more than $400,000 in the first four weeks of his campaign, with 56% of donations under $300. Khanna’s latest campaign finance reports won’t be released until later this month, but the congressman has a hefty war chest that he can tap into if needed, having raised more than $9 million last year.
Tan is optimistic about Agarwal’s chances and said in a statement that he has strong support and is “committed to making sure that innovation and economic growth benefit more people, not fewer.”
“It’s not just about money backing candidates,” he said. “It’s about the centrist revolt against politicians like Ro, who forget why they got elected and who they represent.”
Agarwal has also added Honda as one of his supporters — in a news release, the 84-year-old former representative called him a “principled, authentic voice and an honest broker addressing 21st century issues.”
McCuan, the political science professor, said the endorsement certainly doesn’t hurt his chances, but he’ll need more than a nod from Khanna’s former rival to oust the five-term incumbent.
Khanna doesn’t seem particularly threatened by the new competition and writes him off as a competitor who is getting support from people who “were sympathetic to Trump” and critical of former Democratic President Joe Biden.
“They want just a free rein for business interests, but that’s not the average person in business or tech leader in my district or in Silicon Valley,” he said.
Agarwal, however, contends that the congressman doesn’t fully understand the needs of the Valley’s core industry, which employs a large swath of constituents in the district.
“This race is about someone who understands what the fears are of the people who live in the district and acknowledges them and is someone who is willing to listen and not change their positions,” he said.
