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I understand how it works, but it’s not black and white. Taxes collected and spent by the government also have an effect on economic development. Directly, because people are also needed to carry out the work, but also indirectly because investments in infrastructure, education, healthcare, public R&D, etc. have a proven positive effect on the economic potential of a country. Capital goods are purchased to implement it and all the people who work on it also pay taxes and shop with their money at the local middle class, etc. etc.
And in business, not all profits are invested in growth. Certainly not with the multinationals. Dividends are paid out, own shares are bought back, other companies are bought up or a huge amount of cash is kept on hand. These activities do not necessarily lead to more economic growth than when the government collects taxes and invests in the aforementioned matters. And since this concerns tax on profits, we can assume that (in this case) Microsoft had already made all the valuable investments they could think of.
For example, look at the acquisition of Linkedin by Microsoft. This has made the shareholders in Linkedin very rich: founders and private investors. So it depends on what they did with their money whether it contributed to economic activity in the US. Pension funds may have benefited from an investment in a VC fund that had a position in Linkedin. That is great for the pensioners in that fund, but does not mean that they can suddenly spend more; that money is for later. And the fund managers will have cashed a nice carried interest, but the question is what they did with it. They probably won’t have gone shopping in the area anymore. Maybe they’ve hired a few gardeners and nannies. No doubt money goes to some exclusive schools and universities. Maybe they also bought a second home and a jet. But perhaps they also gambled a lot on cryptos. It is certain that much of that money will also be used to bribe politicians (campaign donations), which will keep taxes low. You actually have to compare the economic value of this consumption with the economic value of what the government could have done with that money. But for the most part, the money will be in all kinds of abstract financial products. And that actually contributes little directly to economic growth.
I don’t think it makes much difference in the short term, because those $$$ ultimately flow through the entire economy. Theoretically, it is usually better for the local economy to have more money among the lower income groups than among the higher ones. Suppose there is 1 million profit tax to be collected. The government employs 10 extra teachers for this purpose, each costing a hundred thousand, and who improve the educational performance of the local school. Alternatively, the 1 million profit goes to the shareholder. Those 10 teachers probably spend almost 100% of their income locally on daily living expenses. That full amount therefore flows through to the local economy. That one owner who gets an extra million is not suddenly going to spend an extra million at the local supermarket and car dealer. He puts that in his investment account, which adds nothing to the local economy.
In the long term, I think that excessive accumulation of a lot of wealth among a small group does not contribute to healthy (and sustainable) economic development. In the US, more and more people are living below the poverty line even with multiple jobs. Public education is shockingly poor in many areas. There is enormous overdue maintenance in terms of infrastructure and healthcare costs are one of the most common causes of personal bankruptcy, even for people with insurance. Not to mention the required investments in sustainability.
And let’s face it: the percentages involved in these taxes are not shockingly high. Well, then Bill Gates will receive slightly less dividend. Will this cause the American economy to collapse?
Ultimately it is a distribution issue. We’ve all been a bit brainwashed in recent decades by the “business good, government bad” mantra, but that’s not necessarily the economic reality. And is life only about maximizing GDP? Or are there other values that we also find important as a society. I personally like living in a country where no homeless villages arise under highway overpasses, or where everyone can simply go to the doctor when necessary. We pay high taxes for this compared to the US, but despite this, virtually everyone has a job here.