Amen Brother Cuban

Wrong, Matt (and Mark).<p>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.<p>Also, you state the following as if its fact:<p>"what capital gains taxes really do is favor the ultra-wealthy who live off of their investments, rather than those generating wealth directly"<p>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.

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 <i>promise</i> 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.<p>[1] Literally, via TNT. [2] AIG, Goldman, Fannie, GM, Ford, etc [3] The TSA, the FCC, the CIA.

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 <i>marginal</i> entrepreneur who is just over the threshold for starting a company. Mark is so far over that threshold <i>for current rates</i> 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.<p>Taxes hurt entrepreneurship; higher taxes hurt it more. Denying this just increases the likelihood of more taxes.

<i>When I started my first company I’d never even heard of capital gains taxes</i><p>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.

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...

I too believe that this is wrong, but for a different reason than does timae. It breaks a simple economic axiom:<p>You Are Not the Marginal Case.<p>It is simply not valid to extrapolate (especially if you're MC, jeez!) from yourself to all entrepeneurs. You Are Not the Marginal Case.<p>Just because you and Bill Gates persevered, Mark frikkin' Cuban, doesn't mean that the marginal tax rate on entrepeneurs is unimportant.<p>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?

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?<p>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.

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.)

A quote from Bill Gross, bond manager extraordinaire:<p>"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."<p><a href="http://www.pimco.com/LeftNav/Featured+Market+Commentary/IO/2008/IO+July+2008.htm" rel="nofollow">http://www.pimco.com/LeftNav/Featured+Market+Commentary/IO/2...</a>

Bzzzzzzt! Politics!<p>I think the most that can be said without much of anyone besides accountants disagreeing is that <i>simplifying</i> the tax code would actually do a lot of good.

<i>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.</i><p>In the beginning, this is the whole point. It's not about the money. It's about doing the thing that you just <i>have</i> to do.<p>0% of nothing is a lot less than x% of something. I still prefer the latter, whatever that may be.

Papyrus!