Another thing about those high tax rates. They were on income.
Pulling liquid dollars out of the business gets taxed. Simply growing the worth of it does not, and or can be done to avoid taxes for the most part.
The impact of that was a much stronger incentive to build companies that are stable, profitable and competitive. Employment was longer term, business more stable, things like pensions made perfect sense, because it made sense to employ people for longer periods of time to gain the advantages from that.
It's not theft at all, just a different operating model. Those owners still grew their wealth, as they do today, the difference being they did it with material investment, INNOVATION, and a longer term return, not the bubble like expectations we see today.
Wall street had less impact on these companies as well, because private companies were more the norm, and not having to deal with Wall Street is a very significant advantage, the primary one being the owner isn't held accountable to the ugly revenue expectations, being able to invest and grow the business in whatever way they feel makes the most sense.
It's not understood by most ordinary people, but public companies are seriously constrained in how they can make investments for the longer term. Taking less quarterly revenue, to make capital investments with cash or short term financing, for example, is not generally seen as favorable, with stock often devalued for failing to meet profit expectations.
Private companies have no such worries, and actually can be well capitalized, running on a pure cash basis, if the owner so desires, freeing them from banks, share holders, investors, etc... which gives a ton of operating freedom.
Using the word "theft" in this context reveals just how badly distorted our general economic expectations have become.
The bottom line is the higher tax rates do not leave business owners destitute. It simply encourages them to be business owners, and reinvest in their businesses so they pay off for long periods of time, are stable, and growing nicely, delivering them a very high net worth, just fewer liquid dollars, which in turn makes for a more consistent, stable, productive domestic economy.
Posted on June 30, 2011 - 07:47 PM