Mark Cuban: Tax Rates Don’t Drive the Economy

The Dallas Mavericks owner today dips into his own archive to repost words that he first published in the lead-up to the 2008 election.  He believes they still apply in talking about Obama vs. Romney and the never-ending debate about what should be taxed, and by how much:

Entrepreneurs who create something out of nothing don’t care what tax rates are. Bill Gates didn’t monitor the marginal tax rate when he dropped out of Harvard and started MicroSoft (btw, it was a ton higher than it is today). Michael Dell didn’t wonder what the capital gains tax was when he started PC’s Limited, and then grew it into Dell Computer.  I doubt that any great business or invention started with a discussion or even a consideration of what the current or projected income or capital gains tax was or would be.

The impact of tax rates on productivity and development is something economists masturbate about,  enterpreneurs don’t waste their time thinking about it. We have business to do.

Entrepreneurs live to be entrepreneurs. I have never had a discussion with anyone about starting a business that included tax rates. Ever. If anyone that wanted an investment from me made a point of discussing tax rates as an impact on their business, I wouldnt invest in them. Ever.

11 comments on “Mark Cuban: Tax Rates Don’t Drive the Economy

  1. This must be why companies and corporations never consider tax rates when locating their facilities, they simply don’t matter.

  2. It’s nice that Cuban uses Gates and Dell as examples – they actually created something meaningful. Most entrepreneurs don’t become billionaires and tax rates do affect their daily lives. Yahoo stockholders found out the hard way and I doubt that they would invest in Cuban again. Ever.

  3. I think you’re both intentionally missing the point. Of course tax rates have a place in business plans and forecasts. Mark is saying that people with great ideas for business don’t say “Well, I would implement this idea and make a fortune, but I’m just so darned mad about taxes being so high, I guess I’ll just skip it.”

  4. Cuban is right. Entrepreneurs are driven by passion, not by calculating a rate of after-tax return. Every survey of successful entrepreneurs shows it. I remember trying to explain this to my colleagues at National Review years ago — none of whom by the way had ever started a business — and getting blank stares in return.

  5. Maybe entrepreneurs don’t consider tax rates when they dream of starting a business, but their potential investors certainly do. Tax rates that encourage formation of capital help turn entrepreneurs’ dreams into real businesses. (Cuban would not be Cuban without the millions of dollars that were invested in his company by outside investors — nor would Gates or Dell.)

  6. I have a dream…….and am not thinking one bit about tax rates. Only how to find the capital and time.

  7. So I tried to find one of those surveys that Wick mentioned. I Googled “successful entrepreneurs” “driven by passion” “after-tax return.” Here’s what Google returned: https://www.google.com/search?q=%22successful+entrepreneurs%22+%22driven+by+passion%22+%22after-tax+return%22&ie=utf-8&oe=utf-8&aq=t&rls=org.mozilla:en-US:official&client=firefox-a

    Maybe that explains the blank stares of Wick’s colleagues: their minds turned off when Wick started in with his “Every survey . . . “

  8. I’m not arguing one way or the other on this tax thing. I’d just like to point out one of Wick’s favorite tools in his rhetoric box. “Every survey shows it.” Or: “Every study has shown.” For the first 10 years or so that I worked for Wick, this trick got me every time. “Dammit,” I’d think. “He’s familiar with the literature on this one. He has read every study.” Then, at some point, it occurred to me to ask him to cite a single study or survey or review that agreed with whatever point he was trying to make. He stared a me for a beat and then unleashed one of his trademark cackles. “You caught me!” that cackle said. “But I’m still going to win this argument!”

  9. Where is the discussion of risk? Investors will invest if the return potential outweighs the loss potential.

  10. Dear Amy S:

    You assume that investors have unlimited capital to invest. Assuming, instead, reality, then given a range of potential investments where the likely return outweighs the risk of loss, investors will invest their limited capital in those investments where the after-tax risk-adjusted return is the highest — which potentially could be in other countries with more favorable tax rates.