The War on Success Will Rage On

12/31/12

[Editor’s note: To tap the wisdom of our distinguished group of Xconomists, we asked a few of them to answer this question heading into 2013: “What does your gut tell you will happen this year even though you don’t have data to prove it?”]

The war on success will continue on and capital gains taxes will go up even more than people think, harming the basic capital formation infrastructure that has fueled the tech boom.

Those who have fantasies that taxes don’t matter usually were born rich or have so much money they can impose their views on the rest of us. Note that none of them ever propose taxes on wealth—just taxes on people trying to get to where they already are. We won’t see the impact for some years, but we are slowly chipping away at our infrastructure that has allowed the United States to dominate the world in innovation, whether it is taxing the innovators more, or denying the best and brightest access to our shores.

The “war on success” waged by the guilty rich and labor unions will have a slow and detrimental impact.

Robert Nelsen is a co-founder and a Managing Director of ARCH Venture Partners. He focuses on biotechnology, pharmaceuticals, and nanotechnology. Follow @

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  • sherk

    Taxes do matter – a lot. Some people just have a different opinion than yours on whether higher rates on top-earners have a salutary or pernicious effect on our democracy.

    By the way, Buffet and other super wealthy folks have come out in support of increasing the estate tax even beyond the 55% Clinton-era rate.

  • sciengr

    What’s with the War on Success, you
    sound like a victim. While the vast majority of Americans have been
    paying normal income tax as a VC you’ve enjoyed a 15% bracket.

    Your VC model requires a steady stream
    of IP and talent coming out of educational institutions. Federal tax dollars
    fuel those institutions so explain again how your wealth formation hasn’t been
    supported by a steady supply of Federal tax dollars?

    Couple of years ago, you were ranting
    about the lack of an educated talent pool to support your companies in the
    Puget Sound region but you also cheered the failure of the State income tax to
    support schools.

    Needless to say taken in this light your
    positions appear to be short sighted and self-serving, do you think about the
    future of America or just the end of your fund?

    • vc

      Its funny…, your “future America” will look like Greece or France, and China will look like us now, so yes, I do care about the long-term future of America, and its innovation economy, not the “end of my fund”. My Funds last 10-15 years and rarely return a penny in the first 3-4, and create new world-leading companies that would not be created otherwise and 1000′s of jobs. I guess that is a bad thing in your world because I make money. VC’s funds are disappearing right and left, and if you want to reduce the capital further, tax it more.

      The “Victims” if we dont watch policy impacts on innovation will be American citizens and innovators with private jobs that support an increasingly large, bloated, and debt-laden government. We should be encouraging, not penalizing, those who take risks, create jobs, and hold for the long term, not short-term flippers. The “Winners” will be China and other folks who adopt our innovation model as we take it for granted, and even worse, harm it with ill-thought-out tax policy. The only reason we have a hope and a prayer of competing with anyone nowdays is our tech economy, and the productivity it creates.

      I dont need to “explain” why VC dollars benefit from federal support…I embrace it, it is a great thing for America, and it is why America has dominated the tech world for the last 40 years. That is the problem with folks with your view, its always a blame the “rich” (should we say successful too?) for getting something, instead of looking at your own plate and seeing if its getting bigger. The loudest voices here are people that already have the money, inherited it and feel guilt, or unions that want to take it away to get “equality”, even if we are all poorer. Move to France or Greece and see how that thinking is working. Maybe get a job in the Government there, which is 65% of GDP. Of course America has benefitted from the tech boom, fueled by risk takers, lots of federal support of basic research, and abundant capital taxed at reasonable rates so there is lots of it (yes people do calculate returns after tax when they invest and allocate capital.)

      I support increasing federal investing in science and education, as well as state investing in science and eduation. You dont need a whacky state income tax or high capital gains taxes that reduce capital flow to do that. Just reform state and federal pensions. And I support President Obama’s proposed (now abandoned) zero capital gains rate on long-term (5-7 year holding period) job creating investment. I don’t support a federal debt that just in the last 5 years is larger that all the debt of all the countries in the history of the world combined, including all past American debt. Its a hidden tax on innovation, and all the increased taxes wont solve the systemic spending problems.

      Bob Nelsen