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What do academic economists actually have to say about the link between entrepreneurship and taxation? My impression is that new tech companies start in respons

What do academic economists actually have to say about the link between entrepreneurship and taxation? My impression is that new tech companies start in response to new technological opportunities and have little to do with marginal tax rates. Hewlett Packard 1939 - Top Income Tax Rate 79% Intel 1968 - 75% Microsoft 1975 - 50% Adobe 1982 - 50% Google 1998 - 40%

falsestprophet 17y ago
Income tax rates are a red herring. In general, entrepreneurial activity is taxed as long term capital gains. You can see those rate are more attractive. Hewlett Packard 1939 - 63% (1 year holding) to 23% (10 year holding) Intel 1968 - 25% Microsoft 1975 - 20% Adobe 1982 - 20% Google 1998 - 20% source: http://en.wikipedia.org/wiki/Capital_gains_tax_in_the_United_States#History_of_capital_gains_tax_in_the_U.S http://en.wikipedia.org/wiki/Capital_gains_tax_in_the_United.... If at any point I experienced a tax rate of 98%, I imagine I would not be highly motivated to earn more money.
- jstevens85 17y ago
  Yet the Beatles continued to pump out more than one album a year. I think there are incentives other than money - fame, status, power, creativity, curiosity etc.
  - KC8ZKF 17y ago
    Bad example. The Beatles only released albums for seven years, then quit.
    - jstevens85 17y ago
      Not exactly. Paul McCartney subsequently released 22 studio albums, Lennon 8, Harrison 10 and Starr 15. I think we can safely say that all four would have already been in the top income tax bracket from their Beatles royalties alone. Yet they were somehow motivated to continue making music.
      - mynameishere 17y ago
        Yet they were somehow motivated to continue making music. I'm sure being tax exiles helped keep their motivation up.
    - stcredzero 17y ago
      I suspect that the Beatles were interested in expression, craft, and having made their FU money. Is the latest economic downturn a sign that there's too much FU money out there? Is everyone with a 7 figure bank account like the hordes of minor nobles? Is our form of meritocracy real and valid? Do we still have civic values that go beyond everyone being in the game so they can quit playing? (Are religious values filling the void in the US in a subtle theocratic takeover?)
  - cturner 17y ago
    Music is bad area to be dealing with economic arguments because copyright is such a murky topic, but by way of counter-example - John Fogerty cut back his productivity due to disagreements with a recording company. Further, the fact that there are incentives other than money doesn't affect the point that money is a factor. You need to consider the examples that an era didn't produce, not just the ones that it did.
  - anamax 17y ago
    > Yet the Beatles continued to pump out more than one album a year. I think there are incentives other than money - fame, status, power, creativity, curiosity etc. While there are other incentives, it's somewhat silly to think that the Beatles were paying the top marginal rate in the US. Didn't we just find out that U2 has done what the Rolling Stones and others did before them to almost completely avoid tax revenue by carefully picking where their royalties were taxed? Marginal tax rates rarely affect the super rich. Instead, they hit the merely well off. That's by design - the "merely well off" collectively have far more money and much less political clout. In fact, you can hit them while claiming to be going after the rich.
  - evgen 17y ago
    Little-known fact: due to the onerous UK taxes they were paying at the time, the Beatles (including John's estate) collected more from their "1" album than they did over the entirety of their previous careers as Beatles.
- david927 17y ago
  You're shoehorning facts to fit your argument: I would be surprised if any single one of the founders of the companies mentioned above knew what the long term capital gains percentage was while they were innovating. The truth is: money is one of many motivators.
tayssir 17y ago
The New York Times has a handy little graphic about the link between federal subsidy/research and products which create a $1 billion industry: http://www.nytimes.com/imagepages/2005/04/01/business/20050402_DARP_GRAPHIC.html http://www.nytimes.com/imagepages/2005/04/01/business/200504... (The accompanying article is here: http://www.nytimes.com/2005/04/02/technology/02darpa.html http://www.nytimes.com/2005/04/02/technology/02darpa.html ) For more on how the system works, you can find a readable overview from sources ranging from Bill Gates Sr. to Noam Chomsky: http://www.taxpolicycenter.org/publications/url.cfm?ID=900584 http://www.taxpolicycenter.org/publications/url.cfm?ID=90058... http://www.zmag.org/znet/viewArticlePrint/8114 http://www.zmag.org/znet/viewArticlePrint/8114 I'm not sure what pg means with "socialism." (Does this word mean that workplaces are run by the workers, an important concept within socialism? Or is it just something about higher taxes?) In any case, I probably don't agree with his argument that the profit motive is necessary for hard work, though I do believe that people who are their own bosses (self-managing workers) are likely much better for innovation than the alternative.

falsestprophet 17y ago

Income tax rates are a red herring. In general, entrepreneurial activity is taxed as long term capital gains. You can see those rate are more attractive. Hewlett Packard 1939 - 63% (1 year holding) to 23% (10 year holding) Intel 1968 - 25% Microsoft 1975 - 20% Adobe 1982 - 20% Google 1998 - 20% source: http://en.wikipedia.org/wiki/Capital_gains_tax_in_the_United_States#History_of_capital_gains_tax_in_the_U.S http://en.wikipedia.org/wiki/Capital_gains_tax_in_the_United.... If at any point I experienced a tax rate of 98%, I imagine I would not be highly motivated to earn more money.

jstevens85 17y ago
Yet the Beatles continued to pump out more than one album a year. I think there are incentives other than money - fame, status, power, creativity, curiosity etc.
- KC8ZKF 17y ago
  Bad example. The Beatles only released albums for seven years, then quit.
  - jstevens85 17y ago
    Not exactly. Paul McCartney subsequently released 22 studio albums, Lennon 8, Harrison 10 and Starr 15. I think we can safely say that all four would have already been in the top income tax bracket from their Beatles royalties alone. Yet they were somehow motivated to continue making music.
    - mynameishere 17y ago
      Yet they were somehow motivated to continue making music. I'm sure being tax exiles helped keep their motivation up.
  - stcredzero 17y ago
    I suspect that the Beatles were interested in expression, craft, and having made their FU money. Is the latest economic downturn a sign that there's too much FU money out there? Is everyone with a 7 figure bank account like the hordes of minor nobles? Is our form of meritocracy real and valid? Do we still have civic values that go beyond everyone being in the game so they can quit playing? (Are religious values filling the void in the US in a subtle theocratic takeover?)
- cturner 17y ago
  Music is bad area to be dealing with economic arguments because copyright is such a murky topic, but by way of counter-example - John Fogerty cut back his productivity due to disagreements with a recording company. Further, the fact that there are incentives other than money doesn't affect the point that money is a factor. You need to consider the examples that an era didn't produce, not just the ones that it did.
- anamax 17y ago
  > Yet the Beatles continued to pump out more than one album a year. I think there are incentives other than money - fame, status, power, creativity, curiosity etc. While there are other incentives, it's somewhat silly to think that the Beatles were paying the top marginal rate in the US. Didn't we just find out that U2 has done what the Rolling Stones and others did before them to almost completely avoid tax revenue by carefully picking where their royalties were taxed? Marginal tax rates rarely affect the super rich. Instead, they hit the merely well off. That's by design - the "merely well off" collectively have far more money and much less political clout. In fact, you can hit them while claiming to be going after the rich.
- evgen 17y ago
  Little-known fact: due to the onerous UK taxes they were paying at the time, the Beatles (including John's estate) collected more from their "1" album than they did over the entirety of their previous careers as Beatles.
david927 17y ago
You're shoehorning facts to fit your argument: I would be surprised if any single one of the founders of the companies mentioned above knew what the long term capital gains percentage was while they were innovating. The truth is: money is one of many motivators.

tayssir 17y ago

The New York Times has a handy little graphic about the link between federal subsidy/research and products which create a $1 billion industry: http://www.nytimes.com/imagepages/2005/04/01/business/20050402_DARP_GRAPHIC.html http://www.nytimes.com/imagepages/2005/04/01/business/200504... (The accompanying article is here: http://www.nytimes.com/2005/04/02/technology/02darpa.html http://www.nytimes.com/2005/04/02/technology/02darpa.html ) For more on how the system works, you can find a readable overview from sources ranging from Bill Gates Sr. to Noam Chomsky: http://www.taxpolicycenter.org/publications/url.cfm?ID=900584 http://www.taxpolicycenter.org/publications/url.cfm?ID=90058... http://www.zmag.org/znet/viewArticlePrint/8114 http://www.zmag.org/znet/viewArticlePrint/8114 I'm not sure what pg means with "socialism." (Does this word mean that workplaces are run by the workers, an important concept within socialism? Or is it just something about higher taxes?) In any case, I probably don't agree with his argument that the profit motive is necessary for hard work, though I do believe that people who are their own bosses (self-managing workers) are likely much better for innovation than the alternative.