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Archive for January, 2010

Jan 4

Samuelson and the “can-do” culture

A hat tip today to Washington Post columnist Robert Samuelson and his piece on the impact of the Great Recession on the “can-do” culture, risk taking and entrepreneurship that is desperately needed to save our spiraling economy.

Risk-taking entrepreneurs are a major force for technological breakthroughs, new start-up companies, and the creation of high paying jobs. Many today believe that the ’78 cut in capital gains tax rates not only helped make Silicon Valley the center of technological breakthroughs but has also had a strong, positive, and lasting impact on overall investment, economic growth and job creation in the U.S.

Samuelson notes:

If Americans don’t continue to create firms — not just high-tech start-ups such as Facebook but construction companies, florists, restaurants, dry cleaners, engineering firms — the economy may languish. Beginning a business is a risky, exhausting, chaotic process. Every year, there are roughly 500,000 to 600,000 company “births” and almost as many “deaths.” Half of new firms don’t make it to year five, says Litan.

Here’s the moral of the story.

There’s a warning here for the Obama administration: Complex regulations or high taxes may discourage start-ups and job creation. As for broader questions, the answers may remain murky for years. Has the mix of economic trauma and aging made us prudent — or merely fearful? Has economic resilience survived — or given way to a stand-pat society?

Let’s not forget our competitive standing with the rest of the world. A report by Ernst & Young LLP, commissioned by the ACCF compares individual long-term capital gains taxes among 25 major economies of the world as well as major trading partners of the U.S. More than half of the countries surveyed have individual capital gains tax rates lower than that of the U.S. See special report here.