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Taxes are incentivizing or disincentivizing, so policy should mirror what you want out of your economy. If the goal is not to have people create startups, there you have it.
That only makes sense if you think the only reason anyone ever founds a business is to sell it to someone else...
If anything, it means that startups are more likely to stick around and turn into real businesses rather than being bought by salesforce and disappearing into corporate oblivion
Also: >Why would a person who founded a startup, and put countless unpaid hours into building it, then have to pay for the sale as if it were employee income?
Is the same as: Why would a person who created his career, and put countless of unpaid hours into building it, then have to pay for the sale of his knowledge and skill?
I would expect the incentive is the massive payout (even after tax).
If a startup founder would be better off as an employee because they have to pay the same amount of tax then it sounds like it was a bad idea to begin with.
Getting your income through a corporation instead of as a salaried employee is not inherently more valuable for society. We don’t want more startups for the sake of having more startups!
Saying that working for existing corporations is more valuable to society underestimates the frequent and obvious value to society of the one-in-100 startup which creates new avenues of wealth for whole sectors of society. A dynamic polity should emphasize that and create more incentives for it - not even for the good of the individuals who do it, but for its own survival.
Oh, just don’t mention that to the authorities because they will make you pay for breaching their working hours act. How dare you have a dream and a drive. Get back in line.
Authorities in Germany don’t care. They are the Beamte, the have a special legal status, barely removable from their positions and with a guaranteed high pension. There are two classes of people in Germany: Beamte and everyone else.
When a foreign company is building a factory, even with tax breaks it's fairly easy to see how it's an investment. I'm less convinced when it's about buying existing businesses, if they are profitable why would you want the profits to be in the control of a foreign entity?
Whether they are initially profitable or not, we've seen what happens in other fields and in particular the industry: after a couple years, the businesses are dismantled and sold for parts.
But aren't they regular income?
Why should one form of income be taxed at a different rate than some other?
Tax rate too high? Sure, agree. Should all income be taxed at same levels? Yes to that too.
1. You sit down at a blank screen and begin writing code.
2. You put your own money into launching your web app, then advertising it, then managing it every day and modifying things before you see a single penny in revenue.
3. You earn revenue, now you are already paying taxes on that revenue.
4. You sell the company which had zero value to begin with, you already paid tax on all the revenue you made. Any tax the government now puts on you is a tax for the initial work which you did. This disincentivizes anyone else from creating something new from scratch.
This is why it shouldn't be treated as regular income. It was done in your free time. Everyone makes regular income, and pays taxes on that, but only a fraction of people work extra hours on passion. Taxing one's passion is essentially to kill anyone's desire to do it.
If no one in your society creates anything from passion, and everyone works for a corporation, your society will not be competitive or dynamic.
Therefore there's a societal, even Socialist interest in encouraging this type of behavior - or at least not punishing it.
Same reason the last couple Kim Jongs have allowed the peasants in North Korea to grow small plots of private vegetables. Even they know that the creative instinct can only be suppressed so far before doing so creates a negative and destructive drag on even the most tightly controlled corporatist system.
Where's the difference if you work 8 hours at your regulat job + 4 hours at a second job? Or 4 extra hours of that second job for your own company? Or just 4 hours of overtime at the first company?
If the farmer improves the land by constructing something on it, using his own money, then that is above and beyond the simple sale of products. It should be taxed as an investment that grew in value (i.e. Capital Gains), not as normal income, because the farmer had to risk his own savings to construct it.
If the construction is a hotel, of course he pays taxes too on the income from that. But he was already taxed for the money he saved which he put into building the hotel, so why should he be taxed twice at the income rate when he sells it?
The point of having a capital gains taxrate lower than an income taxrate is to incentivize people not to bury their savings under the mattress but to use it to create new growth. Whether that's by investing in listed companies or in their own startup.
The central difference between tax on earnings and tax on capital gains is that the money the farmer spends to build something new besides simply harvesting, is money the farmer already had saved after tax, and could have put elsewhere, but he took the risk of putting it here. That is why it's unwise to tax creating new value on existing properties, with your own funds, more than you would tax other investments. It prevents people from improving their own properties (or whatever startup or other project they're working on).
Obviously, if you believe that it's best not to stimulate anyone to create anything new, then you wouldn't subscribe to this idea.
It's a strange world where creativity, boldness and acumen are punished and the public applauds for it.
Not every business is a large international mega-corp. Some are just a couple of individuals building a dream. These people can't afford expensive advisors or attorneys.
If I buy a home at $1M and sell it for $3M, I'm taxed for the $2M profit. Same if I buy a company for $1M and sell it for $3M then I'm taxed for the $2M profit. Whether that tax is 1% or 50% can of course be a subject of debate, but that it's taxed at all is hardly controversial.
Not sure I'm following the debate here but are people suggesting that if I start a company and later sell it for $3M then those $3M should NOT be taxed the same as If had bought it for $1 and sold it for $3M? Why would that be?
You actually do, a lot. It's when you are not rich yet, but want to get rich is where German tax law will hate you.
Thing is if a country makes it easy for someone to do their own thing it can cultivate a healthy environment for founders people may not even get that idea.
But I see why not. Who’s going to work for those who go out of work. It makes less and less sense to start a business in Germany. It all feels like leeching off of people who have the audacity to do something in this country. If you work and become successful, you’ll get leeched off of, if you have no desire to work, no worries, you will get the social net… if you’re German that is. Screw you if you’re an immigrant.
That's the problem with European way of thinking. Entrepreneurs and start-up founders taking on huge workloads and risk to start a business and create jobs, are automatically demonized as "rich freeloaders exploiting the system", to support this ideologically driven class warfare in hopes of getting more votes, where the ruling elite take 9 pieces of the economical pie, give half of the remaining piece to the middle class, the other half to the lower class and tell them "hey look, those business freeloaders are the reason you only half a piece".
If you want to create new jobs in new emergent industries, which is always gonna be a high risk high reward situation with plenty of failures, you'll have to support the ones taking the risks somehow instead of demonizing them as freeloaders. That's how the EU economy is now only half that of the US, when 20 years ago they were on par.
So then in Europe we end up in the situation where most of the new ventures are coming from entrenched industry players and hereditary wealth with connections to politics who actually exploit the system, instead of ambitious working class people taking a chance at building something like in the US. Basically neo-feudalism.