

Amen Brother Cuban - joshstaiger
http://mattmaroon.com/?p=574

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timae
Wrong, 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
Absolutely correct! It's double taxation!

~~~
rms
If you don't tax capital, then only the wealthy will own capital. Eventually
the capital starts owning itself and then the people don't even own capital
anymore.

Our tax system has to try and fix one of the fundamental flaws of capitalism
-- the tendency for the rich to get richer and the poor to get poorer. Without
a capital gains tax, this very worst aspect of capitalism becomes even more
emphasized, as capital will last forever.

~~~
yummyfajitas
In what capitalist/mostly capitalist system have the poor gotten poorer?

Certainly, the rich may get rich faster than the poor, but that's far from the
same thing.

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mynameishere
A 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.

~~~
jeremytliles
Umm, yeah, and unfettered capitalism does such a wonderful job of allocating
resources. Government is terribly inefficient, but what other entity is going
to maintain infrastructure, a social safety net, schools, and other basic
services from which society benefits? I hate that so much money goes to DOD,
TSA, farm subsidies, and the like, but reducing government revenues doesn't
force the government to make tough choices, it simply causes it to run an even
more unsustainable deficit.

By the way, if you lower taxes (and thus government revenue), it's not defense
and corporate subsidies that suffer--they always get their piece--it's
infrastructure and social programs. The "starve the beast" concept simply
creates more suffering for those who can't afford things like private schools,
expensive out-of-pocket health care, and jet time-shares.

~~~
nazgulnarsil
federal government does not provide schools. propoerty taxes (state) provides
schools. federal government does not provide infrastructure. gas tax provides
roads, state funds and tolls go towards bridges and the like.

as for a social safety net? i'd be fine with it if it wasn't so obviously
rotten. it needs to be gutted before any good can come of it.

look at yourtaxes sometime and see what percentage goes towards state vs.
federal. ponder how state government can accomplish so much more with so much
less.

~~~
davidw
> it needs to be gutted before any good can come of it.

<http://www.joelonsoftware.com/articles/fog0000000069.html>

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mhartl
I'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.

~~~
netcan
Depends 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.

~~~
mhartl
You misunderstand the meaning of the term "marginal" in this context: it means
not "mediocre" but rather "on the margin".

~~~
netcan
I don't think so. I meant marginal as in: Very close to the point where she is
going to make a negative vs a positive decision. Or put another way, the
number of entrepreneurs starting a business because of this effect is
incredibly small.

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neilc
_When 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.

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brm
Precisely 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
Most politicians at the national level have law degrees.

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llimllib
I 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?

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dangoldin
Why 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.

~~~
ckinnan
You'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?

~~~
jfarmer
Because it's not necessarily in our interest to favor capital over labor.

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imgabe
I 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.)

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far33d
A 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/2...](http://www.pimco.com/LeftNav/Featured+Market+Commentary/IO/2008/IO+July+2008.htm)

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davidw
Bzzzzzzt! 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.

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edw519
_I 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.

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antidaily
Papyrus!

