Xavier O'Rourke

Hope you're having a great day! 😇

[Alec Stapp @AlecStapp]

This new research on US unicorn startups is really interesting.

Some key facts from the report:

1. Immigrants founded or cofounded 455 of America’s 775 privately held billion-dollar startups, equal to 59% of all US unicorns.

2. 66% of all US unicorns were founded or cofounded by immigrants or the children of immigrants.

3. 79% of US unicorns have either an immigrant founder or an immigrant in a key leadership role.

4. The 455 immigrant-founded US unicorns have a combined valuation of $5 trillion.

5. That $5 trillion valuation is larger than the total stock-market value of companies listed in all but 7 countries.

6. Including immigrant-founded unicorns that went public since 2016 pushes the total value above $5.8 trillion.

7. The number of immigrant-founded US unicorns rose from 50 in 2018 to 455 in 2026.

8. 24% of US unicorns have a founder who first came to America as an international student.

[Xavier O'Rourke @XavierORourke]

@Boogie__Knight @ryu_tay For snowy hydro part 2, this was initiated by Turnbull government in 2017. Do you think the correct move at this point for current government is to cease all funding immediately (other than honouring contracts already signed) and abandon the in-progeess work?

[Xavier O'Rourke @XavierORourke]

@Boogie__Knight @ryu_tay Do you mean you want NDIS to be scaled back in a smart way (reducing fraud and low value programs while keeping it for people who really need it)

Or do you mean you don't want the government to try provide disability insurance at all?

[Xavier O'Rourke @XavierORourke]

Would you rather see deficits expanded? Or higher taxes on wages?

Personal investment income should be taxed basically the same as personal wage income. Taxing personal investment income lower than wages is both regressive and non-optimal for economic growth.

If the current government gets heavily punished for removing the ridiculous cancer that is CGT discount (thus paving the way for future reform which will actually create a neutral tax regime) the ultimate effect will be worse governance in Australia long term.

If the investment class manage to defeat reforms to CGT discount,resentment will grow and eventually a properly anti wealth party will form government and introduce some actually punitive economy destroying shit instead.

Look at the kinds of wealth taxes proposed by senior Democrats in the US right now - that's the political equilibrium you're tugging us towards

[Xavier O'Rourke @XavierORourke]

@matt_barrie This investment is mostly comming from non tax residents who don't pay CGT isn't it?

And for the people who are tax residents - they're still incentivized to park their money in data centers if that's where highest returns are?

[Xavier O'Rourke @XavierORourke]

@wordgrammer All the stuff on the right gets mass produced in obscene quantities off-sight in a large facility. Each product can be used for many other things than burgers so larger customer base, lower average labour cost at POS

[Xavier O'Rourke @XavierORourke]

Are you worried about startup founders or startup investors?

Re founders: I wrote quite a bit about how the right way to conceptualize startup founder incentives in section 6 of this long post: https://t.co/hGGuUdlTtj

Re investors: We have ESIC - perhaps we could take that further - but it doesn't seem crazy to me that narrow concessions really can close any wedge between personal interest and national interest at much lower cost than blanket discounts across the whole economcy.

Thinking about the issues with inflation, and how a 50% discount theoretically helps correct for those - it kind of does on average, but it does the opposite at the level of individual investors.

Part of what makes the design of the 50% discount so bad is that, according to optimal tax theory, it's good to tax "excess" gains (people who get a rate of return about the risk free rate) but bad to tax investors who don't exceed the risk-free rate of return.

The nominal discount gets this completely backwards. People with negative real returns pay higher rates than the people who beat the market

Once you index to inflation, there's actually already a distortion that pushes people *towards* holding an asset for longer than they naturally would. This is because the tax is only realized at the time of sale, so in the interviening years you effectively get an "interest free loan" from the ATO while you continue earning returns on your unpaid taxes.

I think the optimal way to tax is index both gains *and* losses to inflation, and allow lots of spreading out of gains/losses between years (and also apply this to workers who take time off to study/raise children/try start a buisness)

[Xavier O'Rourke @XavierORourke]

I agree with this - but this is a different to claim to "CGT should be lower than wage tax"

It would be great to see lower income tax rates in general, and replace that with consumption tax.

Even better to introduce more land tax.

It's also probably not good for us to run large deficits right now.

Scrapping the CGT discount is a step towards the correct policy.

When I look around right now it feels like there's a strong coordinated push going on right now to lock in the 50% CGT discount forever.

Please consider whether, given political realities the, material effect of your advocacy is going to be "improve the quality of governance in Australia" versus "Punish reform efforts and technocratic centrism in general"

[Xavier O'Rourke @XavierORourke]

The literature you're referring to, if I'm not mistaken, relates to corporate income tax (company tax) not investment returns at the personal level (CGT)

If we want the nation to incrementally approach the correct non-distortionary tax system - these reforms passing increases that probability

[Xavier O'Rourke @XavierORourke]

Why should capital pay less?

How much other people pay you in a free market is a proxy for social value created, so applying same tax rules to all forms of income is what correctly incentivizes individuals to seek out their highest value occupation.

If capital pays less tax, people are incentivized to move into less productive occupations just cause they provide a way to transmute labour into capital gains (e.g. instead of being farm manager employeed to oversee giant corporate farm, lower capital tax rate incentivizes owning your own lower yield farm. Similar for being a surgeon in a hospital vs your own practice etc.)

I agree current system isn't properly neutral. In a perfect world losses would be inflation adjusted, we'd have better income-averaging for everyone (workers and capital holders) and the franking system wouldn't include any distortions that make reinvesting profits worse than paying dividents.

But despite the new changes not being perfect - the old scheme where we apply a 50% discount to nominal gains is the most terribly designed instrument imaginable.

It's distortionary, and regressive, and actually causes investors with the *highest* real rate of return to pay the *lowest* tax rate in real terms.

Calls to adjust the current system in sensible ways like indexing losses to inflation, or only taxing gains above the risk-free rate of return are reasonable and can be made in good faith.

But anyone advocating to eternally preserve the horrendous mechanism that is the 50% CGT discount is either not thinking carefully about the economics, or motivated by concerns besides the national interest

[Xavier O'Rourke @XavierORourke]

Oh right. Yeah the 50% discount was definitely more generous than new regime.

But imo the question of whether it's a justified change hinges on whether this new system is more or less distortionary than before, and on whether taxes on labour vs capital are more or less equal than before.

If before these changes, the marginal dollar of wage tax was a bigger drag on productivity than marginal dollar of CGT, while also being worse than income tax from a redistribution standpoint, then we should want to see changes that leave investors paying relatively more compared to workers

[Xavier O'Rourke @XavierORourke]

@OnSpeculator How many friends do you have who work, don't get welfare or parental support, earn less than 45k per year, and are realizing a substantial capital gains?

[Xavier O'Rourke @XavierORourke]

@PeterOfPerth @samstrades You're arguing with an imaginary person in your head, not with me.

I think successful businesses owners do a great thing for the country good on them.

I think productive workers do a great thing for the country, good on them too.

We should apply same tax rules to both

[Xavier O'Rourke @XavierORourke]

@PeterOfPerth @samstrades What are you talking about? The owner of the buisness gets to keep the upside when it succeeds and eats the downside when they lose.

The gains should be taxed at the normal rate, the losses should be tax-offsets.

[Xavier O'Rourke @XavierORourke]

@SandyXiaotong If Australians spend 50b per year in domestic power bills, meaning 5% is 2.5b

Then we spent 11b on batteries which last ~10 years on average. And in the counterfactual prices would have increased instead

Doesn't seem that bad on its face?

Can you link to a proper analysis?

[Xavier O'Rourke @XavierORourke]

@mlstrat I suffered it for something I truly love too... my wife and our beautiful kids 🥰