Thread by @Noahpinion

Howdy, folks! Today's @bopinion post is about the question of whether high income taxes on very high incomes would hurt entrepreneurship, innovation, and startups.

bloomberg.com/opinion/articl…

Evidence suggests that higher taxes won't do much to discourage rich people from working, or to reduce investment.

But what about innovation?

Basic research could be funded by higher taxes (assuming they're sufficiently broad-based).

But lots of innovation doesn't happen in labs.

Young, high-growth businesses - basically, startups, though much a more broad category than the VC-funded tech startups you read about in the news - are responsible for lots of job creation and productivity growth.

We don't want to kill those.

nber.org/chapters/c13492

And in fact, creating and owning businesses is how most super-rich people make their income, so there is a real worry that very high taxes might make them want to create businesses less.

ericzwick.com/capitalists/ca…

Here's a hypothetical example of how very high taxes on very high incomes might deter someone from starting their own company.

This could also worsen the problem of industrial concentration and monopoly power.

People forget that corporations were very powerful in the high-tax 50s, and profits very high.

But what does the evidence say?

There's not much good evidence available. But what evidence we have is pretty mixed.

And it's worth noting that as top tax rates have come down in America, the rate of startup formation has also come down.

www2.census.gov/ces/wp/2015/CE…

So while it's worth worrying about the effect of high tax rates on business formation, so far the evidence doesn't give us much reason to think the effect would be large.

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