Without any doubt, raising taxes on Americans makes them poorer and never better off, regardless of the justification behind the levy.
But taxes can also be — and have been — used in a punitive way to punish success and reward favored political constituencies.
The Democrats are experts at the latter.
For a half-century, Democrats, when they’ve had enough power to do so, built a ‘progressive’ tax structure that prohibited growth and shunted innovation as individuals and corporations alike were kept from realizing their fullest potential.
Donald Trump and Republicans reversed that trend in 2017 with the biggest tax cuts and reforms in a generation. We saw the results: Lower taxes, especially on job-creating corporations, resulted in massive growth and an explosion of domestic investment, driving down unemployment to below 4 percent, lifting all socio-economic boats, and allowed every demographic to become better off.
That was then. Now the Democrats are back in charge again and because they worship big government and prefer their subjects to be servile, obedient, and dependent, they are eying some hefty tax increases that will undo everything put in place by Trump and the GOP.
The hikes will also hinder expansion and job growth, as a noted Silicon Valley billionaire explains, per Breitbart News:
Prominent Silicon Valley billionaire and investor David Stewart tweeted President Joe Biden’s capital gains tax, proposed to be raised about 20 percent, would make it harder for startups to recruit because “the tax system will punish their employees.”
“If Biden increases the long-term capital gains tax rate from the current 23.8% up to a new cap of 43.4%, it could neuter America’s entrepreneurial ecosystem,” Stewart explained in a Twitter thread.
By the way, capital gains rates kick in when an asset is for gain after being held for a year, Breitbart further explained.
Continuing, Stewart said he “rant the numbers” and found that an employee at Google earning $400k per hear in California “pays 38 percent of income over 10 years in taxes” (which is obscene, by the way, and discriminatory).
Stewart said he “ran the numbers” and determined an employee working at Google earning $400,000 per year in California “pays 38 percent of income over 10 years in taxes.”
He went on to write that a startup founder would pay 36 percent of income on $3.9 million over 10 years (still obscene). However, under “Biden’s plan, the Googler’s taxes don’t change but the founder’s rate shoots to 46%!” (which should be unacceptable to anyone).
Founders and early employees shoulder pay cuts and increased risk when they leave an established company for a startup. They do this in part because there is the potential for a big payday at the end, at an advantageous capital gains tax rate.
It will be harder for startups to recruit bc the tax system will punish their employees. A Googler making $400k/yr for 10 years will pay less tax vs a startup employee making $100k/year for 9 yrs, plus a $3m payday at year 10, despite the Googler earning more total income.
Today’s tax code effectively incentivizes people to take pay cuts and risks associated with building the next generation of companies. If entrepreneurs start to take home less of their total income vs salaried workers at mature companies, the startup ecosystem will suffer.
This is compounded by highly graduated income tax rates in states like CA, which make no distinction between cap gains and ordinary income. Founders with lumpy income (“exit” years interspersed with lean years) have long paid higher state tax rates vs salaried employees.
Bottom line: Bilking the richest Americans will, again, dampen innovation, stifle growth, and inhibit job creation — because that’s what raising taxes always does.
It doesn’t take a billionaire entrepreneur to figure that out.