‘Tax Me More’ Says Wealthy Entrepreneur

[Cutlass]

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The Wealth Report
Robert Frank looks at the lives and culture of the wealthy.
‘Tax Me More’ Says Wealthy Entrepreneur

By Robert Frank

As Congress and President Obama fight over the Bush tax cuts, a small number of left-leaning rich people have come out in support of paying higher taxes. The most famous are the members of the Responsible Wealth Project, who say they pay too little in taxes and want to address inequality.

They may be an eccentric minority, or (in the view of conservatives) a lunatic fringe. But a Quinnipiac University poll this year showed nearly two-thirds of those with household incomes of more than $250,000 a year support raising their own taxes to reduce the federal deficit.

So not all of the wealthy are angry about tax hikes. But that doesn’t mean they just want bigger government. What they want is better government – and investment in growth.

An op-ed piece in the Los Angeles Times by Garrett Gruener, an entrepreneur and venture capitalist, makes two important points about taxing the rich. (Mr. Gruener founded Ask.com and is the CEO of Nanomix and is a co-founder of Alta Partners, so he’s got street cred.)

First, he says tax rates don’t make or break the success of an entrepreneur – or the jobs he creates. He says he’s paying the lowest rates of his working life. But “if you want the simple, honest truth, from my perspective as an entrepreneur, the fluctuation didn’t affect what I did with my money. None of my investments has ever been motivated by the rate at which I would have to pay personal income tax,” Mr. Gruener writes.

History, he says, shows that “modest changes in the tax rate for wealthy taxpayers don’t make much of a difference if the goal is to build new companies, drive technological development and stimulate new industries.”

Second, an economy built only on the rich – who account for the lion’s share of income and spending – is unsustainable.

“What American businesspeople know, and have known since Henry Ford insisted that his employees be able to afford to buy the cars they made, is that a thriving economy doesn’t just need investors; it needs people who can buy the goods and services businesses create.”

He says the tax hikes for the rich should be invested by government in infrastructure and research. Preserving his tax rates won’t lead him to start new companies in the U.S.

“What will change my investment decisions is if I see an economy doing better, one in which there is demand for the goods and services my investments produce. I am far more likely to invest if I see a country laying the foundation for future growth.”

Do you think entrepreneurs make their start-up decisions based on tax rates?

http://blogs.wsj.com/wealth/2010/09/20/tax-me-more-says-wealthy-entrepreneur/?mod=rss_WSJBlog

So someone saying what pretty much anyone who has really thought about it knows. Now how do we tell this to Congress?

 

[bhsup]

I guarantee you I would never join any such organization if I became wealthy tomorrow. Success should not be punished. I don't think the wealthy should pay a higher percentage than me now, and I wouldn't think they should if I become wealthy.

 

[amadeus]

The brilliance of a free society is that this man can hand over as much of his wealth as he wants to who he wants and for whatever reason he wants.

Let's try it this way: "I'm a [religion] and I think the whole world would be better off believing what I believe so Congress should make a law that everyone has to be a [religion]."

"I believe that nobody should have abortions so Congress should make a law to make abortions illegal."

"I think that people watch too much TV so Congress should make a law regulating how many hours of TV there can be."

 

[kosiosko 1]

The brilliance of a free society is that this man can hand over as much of his wealth as he wants to who he wants and for whatever reason he wants.

Let's try it this way: "I'm a [religion] and I think the whole world would be better off believing what I believe so Congress should make a law that everyone has to be a [religion]."

"I believe that nobody should have abortions so Congress should make a law to make abortions illegal."

"I think that people watch too much TV so Congress should make a law regulating how many hours of TV there can be."

good argument ... how do you explain that congress DOES make laws saying how much tax you should pay

 

[Integral]

Last I checked, the IRS does accept donations.

 

[civver_764]

I guarantee you I would never join any such organization if I became wealthy tomorrow. Success should not be punished. I don't think the wealthy should pay a higher percentage than me now, and I wouldn't think they should if I become wealthy.

It isn't really success. Some got lucky, others got left in the dirt. Poor people work just as hard as rich people.

 

[bhsup]

Poor people work just as hard as rich people.

I didn't say otherwise.

 

[civver_764]

So why should they have to pay as much as rich people?

 

[Elephantium]

So why should they have to pay as much as rich people?

Arguably more. The really wealthy can see their tax rate change by a fraction of a percent and have their tax amount change by more than a poor person's entire annual income.

The notion of a flat tax is an oddly socialist idea in a way. "From each according to his means..." fits handily with "Everyone will pay 20% of their income in taxes".

 

[Zelig]

I suspect some of it is self-selection bias.

ie. People who are more likely to support low tax rates for the rich are also more likely to spend more of their money, rendering themselves non-rich, rather than saving their money and thinking they have more than they need.

 

[Lone Wolf]

Everyone should pay the same fixed amount of money. An "equal tax scale in percent" is an at-gunpoint disgusting socialistic discrimination of success, because it ensures that rich people pay a larger fixed amount then poorer people

 

[cubsfan6506]

The notion of a flat tax is an oddly socialist idea in a way.

Right as long as the tax is at 100%.

 

[amadeus]

It isn't really success. Some got lucky, others got left in the dirt. Poor people work just as hard as rich people.

I don't at all accept this premise; income is not tied to some mystical force that can't be quantified. Here's a short excerpt from The Millionaire Next Door by Thomas J. Stanley.

YOU OR YOUR ANCESTORS?

Most of America's millionaires are first-generation rich. How is it possible for people from modest backgrounds to become millionaires in one generation? Why is it that so many people with similar socioeconomic backgrounds never accumulate even modest amounts of wealth?

Most people who become millionaires have confidence in their own abilities. They do not spend time worrying about whether or not their parents were wealthy. They do not believe that one must be born wealthy. Conversely, people of modest backgrounds who believe that only the wealthy produce millionaires are predetermined to remain non-affluent. Have you always thought that most millionaires are born with silver spoons in their mouths? If so, consider the following facts that our research uncovered about American millionaires:

* Only 19 percent receive any income or wealth of any kind from a trust fund or an estate.

* Fewer than 20 percent inherited 10 percent or more of their wealth.

* More than half never received as much as $1 in inheritance.

* Fewer than 25 percent ever received "an act of kindness" of $10,000 or more from their parents, grandparents, or other relatives.

* Ninety-one percent never received, as a gift, as much as $1 of the ownership of a family business.

* Nearly half never received any college tuition from their parents or other relatives.

* Fewer than 10 percent believe they will ever receive an inheritance in the future.

America continues to hold great prospects for those who wish to accumulate wealth in one generation. In fact, America has always been a land of opportunity for those who believe in the fluid nature of our nation's social system and economy.

More than one hundred years ago the same was true. In The American Economy, Stanley Lebergott reviews a study conducted in 1892 of the 4,047 American millionaires. He reports that 84 percent "were nouveau riche, having reached the top without the benefit of inherited wealth."

 

[bhsup]

I suspect some of it is self-selection bias.

ie. People who are more likely to support low tax rates for the rich are also more likely to spend more of their money, rendering themselves non-rich, rather than saving their money and thinking they have more than they need.

Geez man, it was just a video card!

 

[Quackers]

what makes it worse is that these rich people are probably white protestants too.

makes your blood boil

 

[Lone Wolf]

I'm also fine with poor people paying all the taxes, while the rich pay nothing. This would be a truly progressive system, which encourages the poor to become richer, and stimulates the economy in that way. Implementing this idea will result in unprecedented economic prosperity, rivers of milk and banks of honey

 

[amadeus]

If it's really about fairness and the utility of maximizing revenue, instead of taxing income, why not just cap the amount of wealth that can be owned by any one entity? $5 million should be enough for anyone to live comfortably on.

 

[MagisterCultuum]

There is nothing stopping him from donating the extra funds he believes should be tax to the government. I'm not certain if they take general purpose donations, but I know for a fact that they accept money to help pay off the national debt.

I guarantee you I would never join any such organization if I became wealthy tomorrow. Success should not be punished. I don't think the wealthy should pay a higher percentage than me now, and I wouldn't think they should if I become wealthy.

How do you justify choosing to make the flat percentage tax apply to income, thus giving an advantage to those already rich enough not to work at the expense of those still working to become rich?



Putting an arbitrary cap of the total wealth allowed is a horrible idea, but a flat rate tax on total wealth is quite fair.

 

[MobBoss]

http://blogs.wsj.com/wealth/2010/09/20/tax-me-more-says-wealthy-entrepreneur/?mod=rss_WSJBlog

So someone saying what pretty much anyone who has really thought about it knows. Now how do we tell this to Congress?

Whats keeping the wealthy from voluntarily giving their extra cash to the government without having to resort to a tax to take it?

If wealthy entrepreneurs feel this way, whats to keep them from giving to the government right now...voluntarily?

 

[Ziggy Stardust]

The brilliance of a free society is that this man can hand over as much of his wealth as he wants to who he wants and for whatever reason he wants.

The brilliance of a free society is also that those of the non-rich who feel the rich are taxed too heavily can hand over as much of the wealth to the rich, as they want the rich to get back. As has been pointed out here repeatedly.