Obama has introduced the concept of the “Buffett tax,” a few per cent increase in tax rate on millionaires.The Republicans are gearing up to convince the country that this will discourage society’s most productive entrepreneurs from investing and creating jobs.
As someone who has done nothing but start and run companies over the past decade – during which time I have helped create from scratch over 1000 jobs and hundreds of millions of dollars of value – I feel obliged to comment.
At no time have personal tax rates EVER entered into my thought process in creating companies or deciding how hard to work. Nor have I heard any fellow entrepreneurs suggest that they would let a few per cent increase in taxes impact their thinking at all.
Anyone who starts a company does so because he dreams about making millions of dollars (if not more) and producing products that are valuable to people. You think about the size of the market, the availability of VC funding, human talent, and the competitive landscape – you never think about a few percentage-point increase in tax rates. Entrepreneurs pay lower tax rates on capital gains as it is, so the tax rate for “job creators” is particularly low compared to the average American.
Could tax rates get to the point where it would discourage entrepreneurs? Absolutely – but we are nowhere close to that point. I find that federal tax rates are not that high and only compete with other countries which have higher rates. In fact, I know a lot of foreigners who want to come to the U.S. to start companies (because of the market size, VC money and human talent) and very few Americans who go abroad to escape our high taxes.
People create companies because they enjoy it, they love the challenge, and because they think they may be able to make a lot of money. All of us would love to have lower tax rates. But given the U.S.’s massive budget deficit, raising more money from people who have been very successful is a necessary option – and it will not discourage real entrepreneurs from creating jobs.
Kevin P. Ryan is the founder and CEO of Gilt Groupe, an e-commerce company based in New York. He is also the founder and Chairman of Business Insider and the founder of 10gen and other companies.
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