Opinion: Let’s not put special taxes on successful innovators

Because most of us are not saints, if we want less innovation, taxing the profit from it is certainly the path we should take. Photo by phototechno/Getty Images

Article content

In 1921, Canadians Frederick Banting and Charles Best discovered insulin and in doing so changed the fates of millions of diabetics. They sold their patent for it for the princely sum of $2. (True, $2 then was the equivalent of $35 now. But still.) Thirty years after Banting and Best, Canadian George Klein perfected the electronic wheelchair and gave away his patent for that breakthrough for nothing. All three researchers could have earned great piles of money but chose not to.

Article content

Article content

What are we to make of these acts of selflessness, of massive charitable giving? Are the researchers to be applauded? Certainly, yes. Their generosity was admirable and, with or without it, their discoveries made the world not just a little bit better, they made it a lot better, stupendously better. Thanks to them millions of lives were saved, extended and improved.

Article content

Article content

Article content

Among the many questions raised by these two episodes is whether we should promote this sort of altruistic behaviour, maybe even to the exclusion of the more ordinary practice in which inventors earn a profit improving our living standards? Or should we go further and penalize inventors who earn vast wealth this way, for example by taxing them heavily?

Article content

There is more than one way to improve human well-being, of course. Medical breakthroughs are one — that’s obvious. But Henry Ford improved our lives when he made it possible for the middle class, and eventually even the poor, to own a car. Bill Gates benefited humanity, too, by enabling us to better connect with each other electronically.

Article content

Should we have wished that Ford and Gates had followed the pattern of Banting, Best and Klein? Should we encourage all future innovators to give away the wealth earned from their inventions? Yes and no.

Article content

Article content

The case for “yes” is that if Ford and Gates had kept no profits, the benefits from their inventions would have been more immediate. Instead of the improvers of horseless carriages and typewriters being able to own palaces around the world, these monies would have been diverted into more widespread benefits for the many. That is, the charities they gave to would have done lots of good. (Let’s ignore the fact that both Ford and Gates did give away much of what they earned to charity. Assume instead they had spent them on wine, women and song — or whatever their preferences decreed.)

Article content

Article content

Is there even an argument for not encouraging successful inventors to give it all away? Yes, there is. If the expected or even required pattern became the one blazed by Banting, Best and Klein, fewer people would have an incentive to engage in the sort of research that translates into such discoveries. That cannot help human prosperity. Moreover, innovators who succeeded would have fewer funds with which to try even more innovation. Klein, Banting and Best did attract further research funding, but if they had kept more of the wealth they had earned, they would have been able to take their future research in whatever direction they chose — maybe even to Mars exploration, as today’s most famous innovator is doing.