Why would anyone need more than 400k a year for himself in the first place though ?
Apple got initial funding of only 250k, and that was split between equity and loan, very feasible even with a 400k yearly cap. (And I'd also note that 10% of "any money over that" still adds up given some of the salaries paid to top execs)
Secondly, Google's initial funding was only 100k in 98` dollars. The significant 25m round was from kleiner perkins and sequoia, and I certainly imagine that corporate funds for investment would not be held to the same limits as personal income tax.
Finally, facebook was bootstrapped out of their own pocket until they got a 500k invesmtent from thiel in 04 $'s. Once again the "big" investment a year later came from a firm.
In all of these cases the initial seed/bootstrapping money would come FAR under the 400k limit expressed, adjusted for inflation, and that assumes people wouldn't both save over multiple years, or that we wouldn't see more reliance on companies rather than individuals in early stage investment if the tax code shifted such that it was more advantageous.
I defend this largely because in my own readings of history I've attributed a large amount of the current economic state to events of the late 70's and 80s, the tax code changes being a major one of them, and I think your points unfairly detract from the validity of reintroducing such tax structures.
I'd note however that my original point was to emphasize the smallness of most of the initial investments. One does not need to be a billion dollar entity to have enough diversification in high risk investments to make it a worthwhile component of your portfolio.
(I'd also defend America's ingenuity prior to the advent of VC; we were a pioneer in the sciences and technology long before venture capital was a thing. This is an entirely separate discussion about the viability of various forms of tech. growth stimulus that I'm neither qualified nor desirous to have, but I mention it to suggest that if we've found success in other systems before, there may be reason to experiment further when we observe a clearly deleterious trend in the current state.)
When I worked at a hardware store we had a brochure we could order in a gold-plated Ducane grill for $4 million.
That recent graph showing the top 1% having a 6% wealth growth rate is wholly unsustainable for any society. So there's something to be said for trying to level it off.
If the wealth continues the trend to concentrate at the top then there will be an increasingly large and unhappy group of people who will elect increasingly non-mainstream politicians who promise to help them, eventually leading to who knows what kind of unpleasantries for all.
100%. Nobody has a Scrooge McDuck cash vault. Bank deposits are also spent, in the form of depositor's money being loaned out by the bank.
Obviously the classic depositing/loaning service of banks is essential for progress. But hundreds of billions of those deposits are going to making the rich richer. It would be nice if we could come up with a way to provide capital to people who need it while also maintaining a strong middle class. I don't know how to do this but it's worth talking about.
What I really want to know is how much of people's savings (passively invested in banks and things like index funds) is going to fund things like the new Facebook vs. how much is not really doing that much.
People tend to invest in things with a high rate of return. That high rate signals it is doing things that people want done and are willing to pay for. I.e. it helps society.
> a way to provide capital to people who need it
That's exactly what banks do. My bank branch is plastered with posters trying to sell a loan to everyone who walks in.
> passively invested in banks and things like index funds
If you're arguing those are not productive investments, I don't think that's very defensible.
> how much is not really doing that much.
If you're arguing that rich people tend to invest in low performing investments, that doesn't make much pragmatic sense. People get rich by investing in highly performing investments, not dogs.
Banks want people to take out loans because they collect fees and offload the risk via MBS. They give people loans who can't afford them and that's not good for anyone, but then they know they'll get bailed out again if something goes south. None of this is sustainable, healthy, or productive.
That's not a good argument for raising taxes, though.
In other words, nothing like that.
Why? Why is that the magic number that is insane??
The point is incentives. People doing work and providing value is a good thing that we don't want to discourage.
There is zero point in doing extra work if it will be taxed at 90%. People would just work for half a year, then take the rest off.