An important issue confronting the world concerns the high
concentration of wealth and redistribution of that wealth through the tax
system. Part of the problem is what to do with the wealth gained from additional taxation of billionaires (and what is a politically defensible use of that additional revenue). Democratic presidential candidates are starting to create a "dream list" of things to do with billionaires' money. Well, why not use that money to invest in research and development which may lead to more jobs, innovation (even life saving innovation), and additional tax revenue.
Professor Michael Simkovic from
University of Southern California Gould School of Law takes on general claims
that taxing billionaires may lead to less innovation in a short five page
article titled, “Taxes, Spending and Innovation.” Professor Simkovic points to studies concerning
patents and Nobel Prize winners. Professor
Simkovic states:
Public policy can be used to promote innovation by raising taxes
and extensively funding high quality science, math, and engineering education, or
by encouraging immigration of people with those skills.
There has been a general decline in the amount of federal
funding in terms of real dollars for some time for the National Institutes of
Health. Well, billionaires give to universities and other charities, right? We don't need to heavily tax them as they choose to give their wealth to charitable organizations that innovate. Professor Simkovic notes that
voluntary gifts to charity, including to universities, is relatively small at “2%
of GDP”—for gifts from all donors. He concludes
we should look to peer-reviewed empirical work to test claims and that, “Claims
that we can drive more innovation and growth through a higher concentration of resources
in the hands of a small number of billionaires—while providing fewer resources to
middle and upper middle--‐class knowledge workers—are not empirically supported.” [Hat Tip to Professor Paul Caron’s Tax Prof Blog].
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