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This kind of thought exercise is frequently misleading, though, because it relies on the assumptions that (1) effects are essentially linear and (2) that if som

This kind of thought exercise is frequently misleading, though, because it relies on the assumptions that (1) effects are essentially linear and (2) that if something is provably bad at the extreme, it's bad at virtually any amount. If someone makes $10M capital gains through investment and "only" gets to take home $9M because of the 10% tax rate, they've still made nine million dollars. As long as that's objectively a good rate of return, there's little to no disincentive. The effects of a 10% tax vs. a 100% tax are obviously not linear.

bko 5y ago
Funding doesn't work like that. It's not "we have to settle for 9% return instead of 10%". Everything is done at the margin. So if someone prices out a project where they can expect 10% return but now you tell them they are only going to get 9%, then the risk may not be worth it. You may not think like this, but I guarantee you the people in charge of allocating capital do think this way.