Capital vs. labor: who risks more? • Hacker News Board

Re: Capital vs. labor: who risks more?

#31

Post by pastProlog » Sat, Oct 25, 2014, 5:55 PM UTC

polynomial wrote: post #19

Why is it "vs."? Is it necessary for Capital and Labor to be so opposed? It doesn't seem like the optimal arrangement. Wouldn't increased cooperation between these 2 sides reduce risk for both?

Where does the wealth in those dividend checks sent off quarterly to the type of idle class heirs you can watch in documentaries like "Born Rich" come from? It comes from the wealth created by Labor. Workers work and create wealth, and get to keep the first few hours worth of wealth they create. The last few hours of the day, they are made to work for free, with the dividend checks and profits sent off to these heirs and such.

Why should labor cooperate with these parasite heirs who suck off of their wealth-creating ability? Labor hasn't historically, and doubtless will in the future. Capitalism is the fourth major economic system the world has seen, and a rather unstable one. Marx said crises like 2008's $700 billion TARP bailout were harbingers of an eventual total economic collapse, and I for one believe that - one day the economy will go into the ditch and no bailout, New Deal or libertarian type solution will get it going again.

Re: Capital vs. labor: who risks more?

#32

Post by Htsthbjig » Sat, Oct 25, 2014, 5:56 PM UTC

What I see is that in taxes there is never enough. The always want to raise it higher and higher, until politicians confiscate all the wealth for their selves.

In Spain we have 21% VAT taxes,and progressive over 53% maximum income taxes. If you have a house they add property taxes, and this year capital gains have been considered as income taxes.

It is not enough, politicians want at least 23% VAT, and the left party wants to raise the income taxes as it is "fair". They want to remove inflation coefficients so they could confiscate 50% of the value of everything you have when you sell it.

In the new year, people that sell old houses will have to pay more than 30% in taxes(30% of the principal, not the benefit).

Meanwhile we discover that they took the public money of the public banks(cajas) to basically pay themselves luxury life, each one expending half a million dollars in credit card expenses OVER their multimillionaire salaries.

Parties like the socialist party(PSOE),PSOE accepted checks of 50 million euros dollars from the cajas that never paid back.

They took loans from the European Union to help nonworking population, over 1000 million euros and gave it to their friends and family.

They destroyed all the wealth they could touch and you tell me that higher taxes are necessary?

Re: Capital vs. labor: who risks more?

#33

Post by dkfmn » Sat, Oct 25, 2014, 5:59 PM UTC

This isn't really an ideal article to kick off a series of debates that could be very interesting. It's trying to relate too many concepts from taxation theory to economic stimulation to labor management, etc, etc.

If the main point is to ask if capital or labor risks more the answer is trivial: capital. There is a -100% downside for investment and minimum positive earnings for labor. On the other hand capital has an unlimited upside, while labor does not.

A more interesting question would be how to you optimize the opportunity between capital and labor?

Re: Capital vs. labor: who risks more?

#34

Post by hueving » Sat, Oct 25, 2014, 6:00 PM UTC

akgerber wrote: post #23

yummyfajitas wrote: post #2

This article is quite odd: income appears to be taxed "more progressively"...One justification for this is that investors risk losing much or all of their capital. Workers, on the other hand, are guaranteed their wages This is not the primary justification at all, and I'd be rather surprised to see many economists arguing it. The actual reason capital should be taxed less than income (specifically, at 0%) is because…

Why is it the case that there 'no reason to tax savings'? Tools rust, food rots, houses fall down. One can't save useful things indefinitely without cost. Why, then, is it inherently true that a government (or other entity) should provide citizens a mechanism to store the means to buy those things indefinitely for free?

Tools don't rust because the government wants people to buy more tools. Your comparison is nonsensical.

Inflation is already the cost to save money.

Re: Capital vs. labor: who risks more?

#35

Post by yummyfajitas » Sat, Oct 25, 2014, 6:01 PM UTC

gamblor956 wrote: post #27

yummyfajitas wrote: post #13

Earlier quoted context omitted.

The actual detailed argument is that only two things can be taxed - consumption and investment. Consumption is the right thing to tax, since it measures the benefits a person receives from society. My argument isn't circular, however - it merely shows that once you have an income tax you don't need a savings tax. Piketty's argument, near as I can tell, is merely that we might live in a world where the best way to cre…

No, the correct argument is that many things can be taxed: creation, value enhancement, consumption, disposition, investment, wealth, transfers, transfers across borders, etc. (You're also still confusing savings taxes with investment taxes, which are not even remotely the same thing.)Which of these is taxed is a function of political ideology. If you tax consumption, you might also tax wealth, if a large portion of…

The fact that you subdivide investment and consumption into a variety of categories doesn't change the fact that you still need to tax one or the other.

Piketty's argument is that allowing wealth to concentrate in the hands of a few is the biggest threat to the stability of modern economic systems because it ultimately means that less money is available to everyone else, which restricts growth.

This is incorrect. Piketty doesn't make any claims at all about less money (or less wealth) being available to anyone. He claims merely that the ratio of worker income to capital stock will be lower than it otherwise might be. Please, go read even just the introduction to the book.

Further, he hints that that the richest people will have the highest rates of growth of their investments (the book is pretty weak on justifying this, again, academic papers might be better). That means the best way to actually create wealth is to put money into their hands. Note that if the richest people do not have the highest rates of return, then there is no reason to expect wealth concentration. See my blog post which works out the math on this in detail.

Note that I'm actually citing the math in Piketty's book, not his mood affiliation.

Re: Capital vs. labor: who risks more?

#36

Post by FLUX-YOU » Sat, Oct 25, 2014, 6:07 PM UTC

Practical side point:

If I have a lot of capital, I may be able to convert to cash and just go retire to a beach somewhere. If I lose everything and can't convert (even to scrap metal), then I'm about as well off as low skill labor when low skill labor loses work / can't find more (surely I've made a wealthy friend or two while having lots of capital that can help out though).

High skill labor might have some savings and capital if they lose work / can't find more, and the benefits might include severance. That can buy you time to pivot and then replenish your savings.

Low skill labor just has very few options if they lose work / can't find more.

So IMO, capital has the best options depending how nicely you can exit the market.

Re: Capital vs. labor: who risks more?

#37

Post by rdlecler1 » Sat, Oct 25, 2014, 6:12 PM UTC

Who risks more: capital or entrepreneurs? Entrepreneurs may not contribute upfront capital but they are contributing market value of their labor to the enterprise which may be substantial over the first 6-24 months as a venture tries to get off the ground. Entrepreneurs are also expected to go down with the ship. They can't easily pick up and leave if they're burned out or if an attractive opportunity arises. Furthermore, the odds of a return are low without an opportunity for diversification. Capital can make a bet and if the deal is structured right they can dollar cost average into their position to avoid dilution, whereas the entrepreneur will typically face significant dilution. For some unicorns like Facebook or Google there was very little downside risk after the first 6-12 months and they clearly made out better than their investors.

Re: Capital vs. labor: who risks more?

#38

Post by spinchange » Sat, Oct 25, 2014, 6:12 PM UTC

z3t4 wrote: post #12

One side of taxing work is that it creates an incentive for automation.

In time, this is going to become an increasingly important political consideration for those who are interested in low unemployment. To my mind, the business incentives for automation are inherent to the degree such that automation is basically inevitable. The same can't be said for human labor in a multitude of vocations.

I fully expect someone to come along and tell me government shouldn't give tax preference to obsolete jobs, but if you don't like that, you probably like the idea of paying displaced workers basic income assistance for no labor output even less.

Re: Capital vs. labor: who risks more?

#39

Post by [deleted] » Sat, Oct 25, 2014, 6:19 PM UTC

autokad wrote: post #20

first and most importantly, taxes has little to do with risk unless for some reason the government wants to encourage or discourage risk. i wont go into capital gains being double taxed, thats covered bellow. what i will go into is how completely wrong the writer is on risk of labor vs capital. its VERY easy to loose money in the market. unless you want to pay the same taxes on capital gains as your tax bracket (labo…

[deleted]

Re: Capital vs. labor: who risks more?

#40

Post by jjoonathan » Sat, Oct 25, 2014, 6:20 PM UTC

merrillii wrote: post #7

One thing to keep in mind is that capital has already been taxed once when it was first generated. Sure, you can bring up tax loopholes and inequality but generally it's true that the remaining capital is after taxes. So an investor risks losing 100% of their after-tax money. Labor risks their pre-tax money only and it is very likely they ca "re-invest" by moving to another job. Once capital is gone it is gone foreve…

Oh really? My understanding was that due to loopholes corporate taxes are practically nothing compared to the numbers that people keep plugging into their "look, capital actually has a higher tax rate than labor!" calculations.