[Thane_Banquo]

Higher taxes lower the profit from investment, making the risk/reward ratio worse for the investor. So while it might make people less likely to take money out of a small business, it also makes them less likely to put it into one in the first place. It also makes investing in foreign companies more attractive.

Additionally, implicit in the assumption is the idea that, once he takes cash out of his business, he's going to burn it in his fireplace or something. Reality is, any money he doesn't re-invest would be used to buy goods and services, which would increase the profits of other companies. Their owners would, in turn, either expand their businesses or use the profits to consume more goods and services. Etc. etc.

In economics, this principle is called the "Rule of DUH!"

[Hugin]

I thought about that, but of course someone could spend it on foreign made stuff. So some of it might go to the local economy, and some overseas, which is what the original poster said.