Hedge fund manager Bill Ackman and Shark Tank fame Mark Cuban find themselves in the opposite camps regarding their political allegiance. The two discussed Democratic presidential candidate Kamala Harris’ policy proposal regarding tax concessions to startups, in an exchange on X on Sunday.
The Proposal: It all started when Harris posted on X about her proposal to incentivize startups by raising the startup expense reduction from the current $5,000. “Our plan to raise the startup expense deduction to $50,000 will strengthen our small businesses and lift up our communities,” she said.
Ackman Cries Foul: Pershing Square founder Ackman, who has pledged allegiance to Harris’ rival Donald Trump, said the proposal was misleading. “This is extremely misleading,” he said.
The hedge fund manager said that the startups mostly lose money in the first few years of operation and don’t generate profits that a tax deduction could offset. “This is not a $50k gift from the government that can be used to fund a startup despite how it is characterized by [Kamala Harris],” he said.
See Also: How To Invest In Startups
Cuban Defends Harris: Entrepreneur Cuban, who has had his fair share of experience with the startup ecosystem, stepped in to clarify the proposal’s utility to Ackman. Most new businesses are sub-Chapter S or LLC and are taxed at their personal rate, Cuban said.
S corporations, according to the Internal Revenue Service, are corporations that elect to pass corporate income, losses, deductions, and credits through to their shareholders for federal tax purposes. Shareholders of S corporations report the flow-through of income and losses on their personal tax returns and are assessed tax at their individual income tax rates.
“Since $50k is > standard deduction, and it's likely that the entrepreneur has personal income to live off of, the money they save on taxes doesn't hurt. Does it ?” he said. Also, Harris has committed to not raising taxes for anyone making under $400,000, and as a result, 99% of these people will pay the same or lower tax rate, he added.
Incentivizing startups is important as they are a significant part of annual job growth, Cuban said. “And if they grow into bigger businesses , even better,” he added.
Not the one to give up, Ackman asked Cuban as to what percentage of startup entrepreneurs who start S Corp or LLC structured businesses would have $50k of passive income. For $50K income, one should have about $1.5 million in a savings account or a $3 million, plus stock portfolio, he said.
Replying to Ackman, Cuban said, “We need to get you watching shark tank.” It’s not necessarily that the person has passive income, they could have jobs and start companies. “People go all in with their savings and start companies. People have w2 income from working a job, and quit to start a company,” he said, adding that he was fired from a job and then started a company.
Quoting himself as an example, Cuban said, “People create small companies and actually generate net income because they don't pay themselves all that much, if at all.”
“Not everyone is going to use the full $50k. But every dollar in start up costs (of which we probably would agree there are too many) above 5k is a benefit to the entrepreneur,” he added.
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