By Robert Frank - WSJ Blog - Sept. 20, 2010

As Congress and President Obama fight over the Bush tax cuts, a small number of left-leaning rich people have come out in support of paying higher taxes. The most famous are the members of the Responsible Wealth Project, who say they pay too little in taxes and want to address inequality.

They may be an eccentric minority, or (in the view of conservatives) a lunatic fringe. But a Quinnipiac University poll this year showed nearly two-thirds of those with household incomes of more than $250,000 a year support raising their own taxes to reduce the federal deficit.

So not all of the wealthy are angry about tax hikes. But that doesn’t mean they just want bigger government. What they want is better government – and investment in growth.

An op-ed piece in the Los Angeles Times by Garrett Gruener, an entrepreneur and venture capitalist, makes two important points about taxing the rich. (Mr. Gruener founded Ask.com and is the CEO of Nanomix and is a co-founder of Alta Partners, so he’s got street cred.)

First, he says tax rates don’t make or break the success of an entrepreneur – or the jobs he creates. He says he’s paying the lowest rates of his working life. But “if you want the simple, honest truth, from my perspective as an entrepreneur, the fluctuation didn’t affect what I did with my money. None of my investments has ever been motivated by the rate at which I would have to pay personal income tax,” Mr. Gruener writes.

History, he says, shows that “modest changes in the tax rate for wealthy taxpayers don’t make much of a difference if the goal is to build new companies, drive technological development and stimulate new industries.”

Second, an economy built only on the rich – who account for the lion’s share of income and spending – is unsustainable.

“What American businesspeople know, and have known since Henry Ford insisted that his employees be able to afford to buy the cars they made, is that a thriving economy doesn’t just need investors; it needs people who can buy the goods and services businesses create.”

He says the tax hikes for the rich should be invested by government in infrastructure and research. Preserving his tax rates won’t lead him to start new companies in the U.S.

“What will change my investment decisions is if I see an economy doing better, one in which there is demand for the goods and services my investments produce. I am far more likely to invest if I see a country laying the foundation for future growth.”

Do you think entrepreneurs make their start-up decisions based on tax rates?

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