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April 12, 2011

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Mythology is more like it.

I am a small business owner. I can tell you that tax breaks don't spur small business start-ups. Most small businesses lose money for several years. Tax deductions or lower tax rates don't benefit you when you're taking a loss.

Your argument about lower taxes spurring entrepreneurship are refuted by the higher rate of entrepreneurship in Norway, which has higher taxes and a steeper progression in tax rate.

Finally, we've cut taxes for the wealthiest Americans almost every year since the late '60's. During that time the rich have gotten richer, the middle class has shrunk and the deficit has grown.

Insanity is doing the same thing and expecting different results. That appears to be what you are advocating

What's the mechanism?

Your article seems to suggest that having a progressive tax system with a maximum rate of 35% would lead to fewer entrepreneurs than a flat rate of 35%. This seems off since we should be indifferent between the two.

There's also an arbitrage issue: if personal taxes are higher than corporate taxes, then it makes sense to start corporations. Since corporate income is less taxed, you should take as much of your income, and convert as much of your savings, as possible into equity in your company.

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