Creating Shortages

The U.S. publishing industry is driven by celebrity authors and repeat bestsellers, according to testimony from a blocked merger between Penguin Random House and Simon & Schuster. Only 50 authors sell over 500,000 copies annually, with 96% of books selling under 1,000 copies. Publishing houses spend most of their advance money on celebrity books, which along with backlist titles like The Bible, account for the bulk of their revenue and fund less commercially successful books.

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Creating Shortages

President Biden has formally proposed the highest capital gains tax in over 100 years.

Here is a direct quote from the Biden 2025 budget proposal: “Together, the proposals would increase the top marginal rate on long-term capital gains and qualified dividends to 44.6 percent.”

A Biden capital gains and dividends tax rate of 44.6%.

Under the Biden proposal, the combined federal-state capital gains tax would exceed 50% in many states. California will face a combined federal-state rate of 59%, New Jersey 55.3%, Oregon at 54.5%, Minnesota at 54.4%, and New York state at 53.4%.

And the capital gains tax is not indexed to inflation. So Americans get stuck paying tax on some “gains” that are not real. Of course, the government apparently does not have a good understanding of inflation so this point may be lost on them.

What is not lost on anybody is the nature of capital gains. It is the ultimate barometer of risk and reward, the summary, in yield terms, of the chances of success of an investment. Pharmaceuticals, for example, are so expensive to develop, so risky an approval process, and so difficult to bring to market, that many large firms have stopped doing it, shunting the process to smaller, focused companies created and supported by people who understand risk. And reward. That tension makes profits, loses savings, succeeds and fails--and develops pharmaceuticals.

Of course, without those investments, without small, struggling companies there will be pharmaceuticals--just not as many of them.

This is the shortsighted world of those who drain productive capital to create their contracting legacy.

The Biden tax rate is more than twice as high as China’s rate. China’s capital gains tax rate is 20%. Even China understands the consequences of punishing investment.