The Michigan Daily
Vol. XCV, No. 18-S
95 Years of Editorial Freedom
Managed and Edited by Students at
The University of Michigan
Editorials represent a majority opinion of the
Daily Editorial Board
Modern hero
MANY PEOPLE start out intending to change
world but become frustrated early and give up. Tr
lose hope in themselves and conclude that they can't ov
come the obstacles to change things. They see so m
evils and are overwhelmed. They don't stop caring
they don't take any action either.
It's easy to understand why people react this way 'l
reality offsets idealism. Still, every person can hav(
impact. With enough determination, it's possible to
something that will improve the current situation.
Raoul Wallenberg is one such person. His dedicatio
helping the Jews escape the death camps during W
War II helped save nearly 100,000 lives.
Wallenberg knew he couldn't rescue everybody and
accepted that Nazi leader Adolf Eichman couldn't
changed, but he persevered. He issued forged Swe
passports to Hungarian Jews, was shot at by ene
troops, and risked his life so others could live.
Heros like Wallenberg reinforce optimism, and pe
need to strive for this kind of devotion in their own lives
Much has been said about the myopic attitude of tod
students, but that too can change. Students must un
stand that their actions do affect the world around then
Wallenberg was a student at the University from 1
1935, yet he remains a noble example for us all.
Everyone should visit the exhibit depicting the stor
Wallenberg and the Holocaust. The exhibit will be at
Alumni Center until July 15.
OPINION
Thursday, June 13, 1985 Page 5
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d0 Critics have long called the capital gains preference un-
By Lenny Siegel fair, as it favors those who earn through investment over
The ink had not even dried on President Reagan's tax those who work for a living. Perhaps a more telling
n to plan before high-tech executives began to celebrate. criticism is that most of the recent expansion in venture
orld Through an intense lobbying effort, they had won the capital can be attributed to other policies.
restoration of preferential treatment for capital gains - a A large portion of the funds put into young, high-tech
provision absent from the Treasury Dept. proposal companies would have been invested even with no tax in-
i e presented lst fll. centive
In simple terms, the provision taxes ordinary earnings Investors have been trying to duplicate the feat of those
be - salaries, wages, and dividends - at a higher rate than who were quick to back high-flying firms like Apple
dish capital earned through an increase in the value of stock. Computer, and made killings when the stock was first sold
etny This is already the case, but the Reagan plan would to the public. But while capital gains tax breaks did boost
provide even greater savings for those who enjoy capital "take-home" earnings, profits were so high that tax
gains. savings would make only a little difference to the legions
Proponents of the tax break argue it is needed to of new capitalists hoping to back the next Apple.
ople stimulate investment, particularly in young, innovative Less than one fifth of the new venture capital invest-
. companies. A lower tax on capital gains, they say, en- ment in the 1980s has come from investors who benefit
courages investors. from the capital gains tax, reports Mike Barker of the
lay's They argue that backers reap large gains if the ventures Gallatin Fund.
ider- succeed, and if earnings are taxed at a lower rate, the Still, taxing capital gains as ordinary income would
gamble has a higher payoff. Noting that many of likely dry up a significant fraction of the flow of venture
M. America's most innovative firms, particularly in elec- capital, and proponents of the tax break could argue that
tronics, were made possible by venture capital, backers this investment is critical to the development of new en-
[931- argue that the tax break is the key to creating and main- terprises.
taining an economic climate for technological advan- However, the flow of venture capital has turned into a
cement. glut. As David Packard, one of Silicon Valley's most suc-
y of The American Electronics Assn. (AEA) and high-tech cessful entrepreneurs and an AEA leader, said last year,
the investors have focused on reducing the capital gains tax "There s a little too much venture capital available today,
for nearly a decade. The "Congressman from Silicon which makes it possible for some people to get into things
Valley," former high-tech executive Ed Zschau, actually when they're not quite prepared for it."
got his start in politics when he ran the AEA's successful Finally, there is the question of the economy as a whole.
lobbying effort to place such a measure in 1978 tax Backers of capital gains preference conceded that most
legislation. new firms financed by venture capitalists will fail, but
they argue that the economy benefits when the strongest
by Berke Breathed enterprises survive.
This economic Darwinism may sound good, but the
human costs of easy-come, easy-go entrepreneurship are
,qgIW/777,g A 110 r 10 N hMTAN M A enormous. Despite its sustained growth - recessions in
yW TW /WO/ '7H515 7HRJ5T Y. WR high tech have been more like flattenings than a downturn
PA rgy of i4.. 4P fL s 50BE V4 E - the electronics industry lays off a lot of people. In
gVUMS/yRN& M5CM S" U f/PH6. Silicon Valley, more than 10,000 workers were laid off in
fC// T/5 \ ( the last two years, at a time when overall electronics em-
ployment there grew by nearly 20,000.
S Thus while a lower capital gains tax benefits the in-
vestors whe regularly support it, the form of economic
growth promoted by high-tech executives does not offer
r secure work. Without the tax break, funds would still be
available to support new enterprises, but growth would
probably be much more stable.
Siegel wrote thisfor PacificNews Service.
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