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Taxing the Rich Won’t Slow Innovation
But it would slow exploitation
Every time a politician proposes raising taxes on the wealthy, we hear the same chorus of objections. We’re told that if the fabulously wealthy aren’t allowed to keep their money, we’ll all suffer. According to the conservative Manhattan Institute,
Wealth taxes distort behavior in a way that is harmful to economic growth and national prosperity. By taking a fraction of people’s wealth each year, the tax reduces the return to investing and discourages saving. This can reduce growth because investing and capital accumulation are critical to innovation.
Venture capitalist Paul Graham put it a little more directly: “if income taxes are high enough, startups stop happening”
The idea is that, without the rewards that come from their innovation, geniuses won’t have the incentive to innovate. If we taxed Jeff Bezos or Elon Musk more heavily — if, say, Elon had been taxed so that he now was worth $100 or $150 billion instead of $200 billion — then we wouldn’t have the nifty electric cars his company produces, and the thousands of workers that Tesla employs wouldn’t have jobs. Had taxation held Bezos’ wealth under $100 billion (instead of the $135 billion he has today), we wouldn’t have the convenience of Amazon.
