For Angie’s List, a New Niche?

I enjoyed the profile of Angie Hicks (MBA 2000) in the March issue. While pursuing a post-HBS PhD, I supplemented poverty fellowship wages by pounding nails at a small, conscientious hardwood floor installation company of the sort reviewed by Angie’s List. What Angie’s List is missing is a service that includes reviews and ratings of customers who fall into the category of slow-pay, no-pay, or threaten-not-to-pay; who threaten to sue; who ask for much more far outside the contract; and who are generally unreasonable, rude, and nasty.

Reed Benet (MBA 1991)
Bloomfield Hills, MI

A Taxing Question

Regarding his My Two Cents column, “My Beautiful Capital Gain,” in the March issue, I’d ask this of Dal LaMagna (MBA 1970): The money you invested was already taxed once at ordinary income tax rates, so why should you pay any tax at all for putting your money at risk? Just because you would gladly pay a higher capital gains rate doesn’t mean others would.

Brian W. Keane (MBA 1986)
Potomac, MD

Both Sides Now

LaMagna has fallen into the trap set by those who believe “fairness” runs only in one direction. Even if I believed in a more progressive tax code for the über-rich and the elimination of the Bush tax cuts (I support both), why would I ever allow that to happen when it doesn’t address government’s insatiable feeding of an ever-expanding bureaucracy, its unwillingness to confront unsustainable entitlements, and its all-too-easy virtue in accommodating special interests, particularly as they corrode the tax code?

Unless both sides of the equation, revenue and expense, are questioned on the issue of fairness, I’m digging my tax heels in.

Brian Mullen (MBA 1980)
Lawrence, NY

Investors Will Do Their Thing

LaMagna has it just right! There is no way people will stop investing if the capital gains tax rate is 30 to 40 percent, the same as upper-income tax rates. Check your economic history books, folks. Did anyone stop investing when tax rates reached 70 percent under Eisenhower? I don’t think so. As for government versus private-sector efficiency, it’s true that in many areas, private is more efficient. But not in health care. Compare Medicare administrative costs to those of private insurers. Medicare Advantage has average costs 15 percent higher than traditional Medicare.

John Heilner (MBA 1967)
Princeton, NJ

The Same for Everybody

I agree that it’s unfair for a secretary to pay taxes at a higher rate than an investor. So let’s bring everyone’s rate down to a flat 15 percent. There’s no reason to raise the rates of million-dollar earners. They don’t use any more government services than a $50K earner. Everyone should pay something, and no one should get a tax refund if one pays no taxes. Let’s get rid of this Rube Goldberg tax system and put some sanity to work.

Jim Werner (MBA 1973)
Mount Airy, MD

It’s All about Access

I agree with Dal LaMagna 100 percent. I don’t get (or buy) the reasoning that is typically given for the differential in rates. In 1986, the US government equalized the rates, and we saw no difference in the activity of people investing. Also, for the life of me, I don’t understand the rationale behind the 15 percent carried interest rate, which I have to admit I have benefited from. The whole structure of the tax system (including the corporate side) is patently unfair and riddled with special benefits for those with access to decision makers. Unfortunately, it is this latter point that makes reform of the system so difficult and makes us so desperate for real leadership in Washington.

David Bradford (MBA 1982)
Short Hills, NJ

Don’t Punish Success

I disagree with Mr. LaMagna 100 percent. First, numerous studies have documented that increasing capital gains taxes negatively impacts capital formation. A decrease in capital formation directly impacts the creation of jobs. Second, the United States needs to remain an attractive destination for foreign investment. Right now the US corporate tax rate is among the highest in the world. Do we have to make the same mistake with respect to capital gains? Third, using the notion of fairness as a defense of high capital gains taxes is incorrect. The capital gains rate is a policy lever, not a social lever. A government should care about the less fortunate, for sure. But a government cannot achieve that by punishing success and standing in the way of economic growth.

If capital gains recipients do not want to voluntarily pay more to the government on the reasoning that doing so would not solve the underlying issues, perhaps they can fund research that shows how increasing the capital gains tax would create economic growth and opportunity. This important matter merits informed discussion.

Ashok Ramaswami (MBA 1996)
Pleasant Hill, CA

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