Taxing Entrepreneures & Risk Takers

postagedue.jpgI hear a lot about encourageing risk taking and the benefits entrepreneurs provide to an economy. I'm still waiting for all this good will to funnel down to the level I'm at. It's kind of like that saying about Trickle Down Economics: 'The middle class didn't get trickled down... they got trickled on.'

Should We Worry about the Rising Inequality in Income and Wealth?, Judge Richard Posner considers how a high marginal taxes effects entrepreneurs and risk takers:

high marginal tax rates discourage risk-taking. Consider two individuals: one is a salaried worker with an annual income of $100,000 and good job security, and the other is an entrepreneur with a 10 percent chance of earning $1 million in a given year and a 90 percent chance of earning nothing that year. Their average annual incomes are the same, but a highly progressive tax will make the entrepreneur's expected after-tax income much lower than the salaried worker's. Many of the people at the top of the income distribution are risk takers who turned out to be lucky; the unlucky risk takers fell into a lower part of the distribution. It is rich people as a class who are growing relatively richer, not necessarily individual rich persons.

via Venture Voice