, “The 1978 Act resulted in substantial ‘unlocking’ or increased realizations of previously accrued but unrealized capital gains.”
That meant the tax base tax expanded greatly as new business ventures blossomed. Those businesses, which otherwise would not have existed, then paid taxes that otherwise would not have been collected. Reducing risk is crucial to encouraging new startup companies. For California, it isn’t just the great weather and the concentration and cross-fertilization of similar industries in Silicon Valley that sparks innovation. It’s the seed money “unlocked” by the cuts in the capital gains tax rates.
Think in your own life. If you invest in a company, you want to make money. It’s possible you could lose it all if the company goes broke. That’s the risk. But the greater the upside – the profit potential – the more likely you’ll take that risk. Taxes reduce profit. Therefore, if taxes themselves are cut, your profit potential rises. So you’ll take that risk, helping fund the new company and new jobs. Maybe that company is named Apple or Facebook or Google.
Carter’s deregulation of the transportation industry also was crucial. It’s why all those Amazon boxes end up at your doorstop so efficiently and you can fly fairly cheaply around the country. The