Opinion: Entrepreneurs deserve greater respect and lower taxes

Skip to Content News Archives Economy Energy Oil & Gas Renewables Electric Vehicles Mining Commodities Agriculture Real Estate Mortgages Mortgage Rates Finance Banking Insurance Fintech Cryptocurrency Work Wealth Smart Money Wealth Management Investor Personal Finance Family Finance Retirement Taxes High Net Worth FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials More Innovation Information Technology FP500 Podcasts Small Business Lives Told Tails Told Shopping Financial Post Store Obituaries Place a Notice Advertising Advertising With Us Advertising Solutions Postmedia Ad Manager Sponsorship Requests Classifieds Place a Classifieds ad Working Profile Settings My Subscriptions My Offers Newsletters Customer Service FAQ News Economy Energy Mining Real Estate Finance Work Wealth Investor FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials This advertisement has not loaded yet, but your article continues below.HomeFP CommentOpinion: Entrepreneurs deserve greater respect and lower taxesThe good they do providing better goods and services far exceeds any effects of their philanthropy, however worthy and effective it may beEliminating capital gains taxes altogether would foster capital formation and the productivity that often ultimately flows from it, writes Michel Kelly-Gagnon. Photo by Getty Images/iStockphotoIn an era of renewed interest in wealth taxes and systemic vilification of the ultra-rich, it is worth emphasizing the often forgotten point that successful entrepreneurs offer benefits for society at large that go far beyond the wealth they accumulate for themselves.THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLYSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.SUBSCRIBE TO UNLOCK MORE ARTICLESSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.REGISTER / SIGN IN TO UNLOCK MORE ARTICLESCreate an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountQuite apart from any philanthropy they may engage in, the rich create great benefits for all of us. Often their contribution is referred to as “giving back to society.” That implies, as Marxists typically claim, that successful business people have somehow “taken away” the wealth they earned through their entrepreneurial activity and are now trying to redeem themselves through philanthropy.Having spent most of my adult life in the think tank world, which depends on the generosity of donors to underwrite its essential civic role of research and educational work, I am a big fan of philanthropy. Philanthropists are our partners in that very worthwhile endeavour.Get the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againBut entrepreneurship itself is a “positive-sum game.” When entrepreneurs get rich, and especially when they do so on a recurring basis, it’s because they are providing goods and services their customers want or even need. They also provide livings for their employees and returns for their investors. Which means they have already given plenty to society before providing a single dime through charity.Yes, sometimes the very rich don’t earn their money by serving others in better and novel ways. Sometimes they merely inherit their wealth, and they may just live lives of leisure on that wealth. It may not be the choice we would make in their situation. But there is nothing inherently wrong with it, so long as at some point the wealth in question was honestly earned. Moreover, many people who are not first-generation entrepreneurs themselves are very serious custodians of the wealth they have inherited and use it wisely in a successful mix of business and philanthropy.And in fact, as reported recently in the Economist (“The rise of the deserving rich,” July 23), it is increasingly common for the uber-rich to have created their wealth themselves in useful “”first-generation” entrepreneurial ventures. In the early years of this century, nearly half the wealth of the very rich was inherited, but that figure is now down to about a quarter. More and more, the rich are getting rich under their own steam, making new products or figuring out better ways of doing things or delivering services.Indeed, as the Economist points out, the rise in the 2010s of “mobile-first internet” (apps and content designed for phones rather than desktops), which itself made lots of entrepreneurs very rich, made it easier for companies to reach consumers quickly and directly. It also allowed whole new types of businesses — from Spotify to Uber to SkipTheDishes — to come into being and scale up rapidly, transforming their sectors in the process. If we want this kind of innovation to stop, by all means, let’s tax the people who make it happen!Harvard economist Stefanie Stantcheva has written about how raising taxes reduces the expected returns to innovative effort, investment and entrepreneurship, thereby discouraging these activities. In another study looking at the effect of taxes on innovation in the United States over the course of the 20th century, Stantcheva and her co-authors find that higher taxes reduce the quantity of innovation in a given jurisdiction.This advertisement has not loaded yet.This advertisement has not loaded yet, but your article continues below.By contrast, eliminating capital gains taxes altogether would foster capital formation and the productivity that often ultimately flows from it. Several very successful jurisdictions, such as Singapore, New Zealand and the United Arab Emirates, either exempt capital gains entirely or provide significant preferential treatment for them. Missouri recently became the ninth U.S. state not to levy a state-level capital gains tax by eliminating it for individuals and phasing it out for corporations by 2029.Bottom line? If we want to keep enjoying the benefits of innovation, we must give the entrepreneurs who become rich by bringing that innovation into our lives the respect they deserve and the policies that will encourage them to flourish by improving all our lives.Michel Kelly-Gagnon is founding president of the MEI, formerly known as the Montreal Economic Institute, an independent public policy think tank with offices in Montreal, Ottawa, and Calgary.Notice for the Postmedia NetworkThis website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more about cookies here. 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