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Amen Brother Cuban
- brm 18y agoPrecisely why you shouldn't have people who don't start businesses enacting policy for people who do... I make a general effort to vote for politicans who have eaten their own dog food on their policy platform, be it having spent time in the energy sector, run their own business, or whatever else...
- Prrometheus 18y agoMost politicians at the national level have law degrees.
- dangoldin 18y agoWhy not just have income be considered the sum of all the money you've made in a year? 100k salary with 25k stock gains would give you an income of 125k and that's just taxed normally. Why should capital gains be treated differently at all? Also, just simplify the entire thing and have a simpler tax rate. It may also be interesting to see what happens if the party responsible for what tax dollars are spent on is not the same party that decides the allocation of the money. Group 1 creates a list of priorities A, B, C but voters then get to choose the tax dollar allocation.
- timcederman 18y agoThe knock-on effects are why tax law is as (necessarily) convoluted as it is.
- Prrometheus 18y agoIf, by some miracle, you managed to simplify the tax code, then lobbyists would be there the next day trying to add loopholes to it for their clients. Without constraints on government (and ours has none de facto) there is plunder to be had in Washington, and people respond to incentives.
- ckinnan 18y agoYou'd penalize the investment gains with double taxation. The person already paid income taxes on the money that was used to generate the $25K. Why should government policy penalize savings and investment?
- mynameishere 18y agoA lot of strawmanism going on. It's not that taxation prevents entry-level entrepreneurs from starting businesses. Rather, taxation represents a misallocation of capital. If a company or person loses an extra million dollars to the government, I promise you that the money will be converted into dust [1], or handed out to failed businesses [2], or spent directly on tyrannical activity [3], or redistributed to pressure groups, or any company or foreign nation with a good lobbying firm or PAC, instead of being allocated responsibly. [1] Literally, via TNT. [2] AIG, Goldman, Fannie, GM, Ford, etc [3] The TSA, the FCC, the CIA.
- timcederman 18y agoSure governments make mistakes, but most first world countries do a pretty good job of converting taxes to public services and a generally good framework for supporting the citizens.
- Prrometheus 18y agoI don't know which country you live in, but most of my tax money goes towards killing brown people and paying for other people's healthcare. I pay most of my taxes to the Federal Government and receive the most services from my state and local governments.
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- timcederman 18y agoWow -- downvoted to troll status? Maybe I should clarify my argument. The parent PROMISED us that our money would turn to dust. I think it's safe to say that generally taxes get turned into 'good' things, even if some misappropriation does occur. I think to say that any extra taxed money goes to waste is a little extreme.
- antidaily 18y agoPapyrus!
- neilc 18y agoWhen I started my first company I’d never even heard of capital gains taxes Granted, but I guarantee that the limited partners in the VC firms you might consider for funding are very familiar with the tax structure in the US. If you raise the taxes on investment income, you effectively reduce the return on venture capital funds, which reduces the amount of money VCs will be able to raise, which reduces the amount of money available to entrepreneurs.
- mhartl 18y agoI'm a big Cuban fan, but I was surprised and a bit disappointed when he made this statement (and I'm also surprised to see Matt defending it). I agree that many entrepreneurs don't consider tax rates when starting up (at least not consciously), but for any given rate there is a marginal entrepreneur who is just over the threshold for starting a company. Mark is so far over that threshold for current rates that he reaches the erroneous conclusion that taxes don't matter in general. I guarantee that there is a rate---whether 90% or 99%---at which even Cuban would throw in the towel, by quitting the game or (more likely) fleeing the country. Taxes hurt entrepreneurship; higher taxes hurt it more. Denying this just increases the likelihood of more taxes.
- comatose_kid 18y agoI think the term you used 'marginal entrepreneur' is appropriate if the tax rate is a significant factor in going forward with a business. As you said, if the tax rate was in some ridiculous extreme, of course that would be a factor. But then I'd wonder what kind of country/economy would raise taxes to such a high altitude.
- Prrometheus 18y agoIn my old line of work, we whipped up a spreadsheet model to show a new company's potential return on investment before we took the idea to investors. For any given company, there is a tax rate high enough that would have made it non-worthwhile. Of course, we weren't in the web business, so numbers mattered to our investors.
- mhb 18y agoThat's the definition of the word "marginal" here. It is axiomatic that the tax rate is the deciding factor for the marginal entrepreneur. If you think it has some meaning dependent on the tax rate, then you're not understanding what marginal means.
- netcan 18y agoDepends also what you see as an entrepreneur. What A lot of people see as entrepreneurship is a largely binary exercise: success/failure. Since tax rates do not really effect the venture in this way, they shouldn't effect the decisions of an entrepreneur. A 'marginal entrepreneur' would need to be very marginal. Even if you consider complex effects (the effect of your uncle making $1m in the 80s vs $.75m on inspiring you). Cuban's talking about the 'within reason' limits based on practical choice a government is likely to make. What might be affected by the tax situation is the flow of investment capital. Since Cuban is disregarding that as a factor, that has no effect.
- timae 18y agoWrong, Matt (and Mark). Entrepreneurs "have business to do" as Mark puts it because they stand to make some money from their efforts. The less money they stand to make, the less incentive. period. Also, you state the following as if its fact: "what capital gains taxes really do is favor the ultra-wealthy who live off of their investments, rather than those generating wealth directly" No. In order for the ultra-rich person in your example to have accumulated $5M, he EARNED $6,750,000 and paid the government $1,750,000. So, by paying tax on his investment income, he's paying tax twice on the same money. That simple error aside, you're also missing the point that capital gains tax discourages investing in companies! Which has an impact on a company's cost of capital which has an impact on the price of goods and services which has an impact on you.
- deepster 18y agoAbsolutely correct! It's double taxation!
- trominos 18y agoSo? Tax rates are determined (well, should be) by what works. If some double taxation is good for the nation, more power to it.
- laut 18y agoFirst of all it is morally wrong. And for the good of a nation? Nationalism is an ugly thing. Second of all it's not good for the nation.
- rw 18y agoMorally wrong? Like how? Please look up "utilitarianism" and do some reading on ethics, social contracts, etc. A statement like the one you made really needs further reasoning to back it up. You might even be correct - but just claiming something to be true doesn't make it so.
- 18y ago
- far33d 18y agoA quote from Bill Gross, bond manager extraordinaire: "That ol’ Laffer Curve has a certain logic to it, but it only makes sense at the upper margin. People did work less at confiscatory tax rates imposed pre-Thatcher/Reagan but once they got down to 50 percent or lower, it was all gravy – promoting conspicuous consumption as opposed to higher productivity and overtime at the office." http://www.pimco.com/LeftNav/Featured+Market+Commentary/IO/2008/IO+July+2008.htm http://www.pimco.com/LeftNav/Featured+Market+Commentary/IO/2...
- llimllib 18y agoI too believe that this is wrong, but for a different reason than does timae. It breaks a simple economic axiom: You Are Not the Marginal Case. It is simply not valid to extrapolate (especially if you're MC, jeez!) from yourself to all entrepeneurs. You Are Not the Marginal Case. Just because you and Bill Gates persevered, Mark frikkin' Cuban, doesn't mean that the marginal tax rate on entrepeneurs is unimportant. Let's restate the argument this way: "Two of the most successful entrepeneurs of all time were undeterred by high marginal taxes on their fledgling businesses, therefore high marginal tax rates do not kill fledgling businesses". Sounds a bit different, eh?
- imgabe 18y agoI think the case against capital gains is less about the entrepreneur and more about the investors. If the capital gains tax is raised so high that investors can get a better after tax return by putting their money into lower risk investments, then they're not going to want to bother funding new businesses. This may not be an issue if you're making a web app and your only capital outlay is living expenses and hosting fees, but this could seriously hurt innovation in fields where money is required up front to even get started (hardware, pharmaceuticals, etc.)
- davidw 18y agoBzzzzzzt! Politics! I think the most that can be said without much of anyone besides accountants disagreeing is that simplifying the tax code would actually do a lot of good.
- edw519 18y agoI doubt that any great business or invention started with a discussion or even a consideration of what the current or projected income or capital gains tax was or would be. In the beginning, this is the whole point. It's not about the money. It's about doing the thing that you just have to do. 0% of nothing is a lot less than x% of something. I still prefer the latter, whatever that may be.