One of the biggest arguments in favor of Republicans holding the line on top tax rates, the carried interest income “hedge fund” loophole and investment tax rates has been the idea that wealthy people whose risk appetite is critical to the economy will go on some sort of strike otherwise. Wealthy investor person Warren Buffett, who’s been around the block for a few years himself, tackles this idea in a new op-ed at the New York Times…
Between 1951 and 1954, when the capital gains rate was 25 percent and marginal rates on dividends reached 91 percent in extreme cases, I sold securities and did pretty well. In the years from 1956 to 1969, the top marginal rate fell modestly, but was still a lofty 70 percent — and the tax rate on capital gains inched up to 27.5 percent. I was managing funds for investors then. Never did anyone mention taxes as a reason to forgo an investment opportunity that I offered.
Under those burdensome rates, moreover, both employment and the gross domestic product (a measure of the nation’s economic output) increased at a rapid clip. The middle class and the rich alike gained ground.
So let’s forget about the rich and ultrarich going on strike and stuffing their ample funds under their mattresses if — gasp — capital gains rates and ordinary income rates are increased. The ultrarich, including me, will forever pursue investment opportunities.
He makes some important points here about human nature and the fact that investment taxation historically has not been a big economic deterrent in the gran scheme. Also, I have never seen someone craving to be taxed more in my life.