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

Re: Capital vs. labor: who risks more?

#41

Post by jjoonathan » Sat, Oct 25, 2014, 6:22 PM UTC

dkfmn wrote: post #33

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…

Joe Schmo losing his $20k/yr burger flipping job for a year will suffer far more than Bill Gates losing $20B in a market fluctuation, despite the fact that the latter is literally 1,000,000 times worse on paper. Monetary risk and utility risk are not the same thing and choosing one over the other is equivalent to picking a side in the debate.

As for optimizing opportunity between labor and capital, I tend to suspect that this metric would favor more equitable wealth distribution so as to maximize the feasibility of bootstrapping (low overhead, perverse incentives avoided, nothing remotely exploitative about it on either end of the deal) and to maximize the "surface contact" between capital and labor. But nobody is looking to maximize opportunity in general, only their individual opportunity, and the Nash equilibrium for that process lies in exactly the same place as the Nash equilibrium for wealth.

Re: Capital vs. labor: who risks more?

#42

Post by badsock » Sat, Oct 25, 2014, 6:29 PM UTC

Htsthbjig wrote: post #32

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…

You seem to be unnecessarily conflating taxation with corruption. There are plenty of places that collect high taxes that don't have that sort of routine unethical behaviour.

Re: Capital vs. labor: who risks more?

#43

Post by dllthomas » Sat, Oct 25, 2014, 6:29 PM UTC

gamblor956 wrote: post #15

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…

Capital gains taxes are not savings taxes. They are taxes on income arising from the disposition of capital assets. They are subjected to lower rates than normal income to incentivize capital investment income streams over normal income streams. Only a few countries impose savings taxes (also known as "wealth taxes"): France, Spain, the Netherlands, Norway, and Switzerland. There might be two or three more that I'm m…

In the presence of inflation, capital gains serve as a low (tax rate * inflation rate) tax on saving in something that is not cash. (Inflation itself is kinda sorta a tax on savings that are cash.)

Re: Capital vs. labor: who risks more?

#44

Post by adventured » Sat, Oct 25, 2014, 6:35 PM UTC

Htsthbjig wrote: post #32

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…

It's the same story that always plays out in countries that push the line into confiscatory taxation systems.

France has seen horrific economic 'growth' for the last decade, less than 1% avg nominal growth per year over that time, and negative in real terms. They're famous for their high regulation, high taxation approach. Doesn't appear to be working out, as they're sliding into another recession right now, with unemployment spiking 1%, to a new all-time record high, in just the last few months.

The only people that champion these types of systems, are either people ignorant of them in actual experience, or people that can benefit from the State graft. Much like fans of real Socialism or Communism.

We're told the modern system of high taxes works better, and yet Europe is in a depression economically, and its GDP is still at or below 2006/07 levels, and in inflation adjusted terms is much lower. Meanwhile the debt keeps piling ever higher, and the economies keep requiring ever more stimulus to just stay at 0% growth. It's the end of the run for the failed Keynesian experiment.

Re: Capital vs. labor: who risks more?

#45

Post by zo1 » Sat, Oct 25, 2014, 6:38 PM UTC

unchocked wrote: post #6

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…

Your argument is circular. Essentially, you say that capital should be untaxed because it was already taxed as income. But that's a value judgement that assumes your conclusion. There is a good case for taxing capital (savings). See Picketty.

"See Picketty."

Really? Have we really dropped to that point? The Picketty Card?

Re: Capital vs. labor: who risks more?

#46

Post by adventured » Sat, Oct 25, 2014, 6:38 PM UTC

badsock wrote: post #42

Htsthbjig wrote: post #32

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…

You seem to be unnecessarily conflating taxation with corruption. There are plenty of places that collect high taxes that don't have that sort of routine unethical behaviour.

Which countries collect high taxes that don't have economic stagnation as a result of it?

I can think of only a few out of ~195 countries in the last decade that have seen good economic growth with high taxation. Most of which have some other prop, such as oil in Norway.

Re: Capital vs. labor: who risks more?

#47

Post by adventured » Sat, Oct 25, 2014, 6:46 PM UTC

pastProlog wrote: post #31

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…

No they're not made to work for free. That dividend check does not belong to them. They take a job, with a paycheck, and that's all there is to the arrangement, and they know that going into it. Those are the terms.

Labor should not get compensated for that which they are not owed and did not agree to.

It's that simple.

If they don't like the terms, they can go create their own wealth elsewhere, like so many millions of people before them have had to.

Your theory is that labor deserves to be paid something they didn't bargain for, and that does not in fact belong to them. You're arguing in favor of violent theft, because that's the only way such a system can ever be implemented, through extreme violence; there is no other way to give labor money that isn't owed to them, and does not belong to them, you have to steal it with guns.

Here's your scenario: so I have $1,000 to my name. You have $50,000. I don't like that you have what I consider to be capital, and I don't think you deserve it. I think that capital should be taken from you, because you're a rich person compared to me. I think you should have to give me most of your money.

It's a spiral to oblivion, because there's always someone richer and better off, and someone claiming that someone else doesn't deserve what they have. It's a system of envy and violence.

Re: Capital vs. labor: who risks more?

#48

Post by guelo » Sat, Oct 25, 2014, 7:24 PM UTC

dkfmn wrote: post #33

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…

You ignore the article's point about the risk of choosing a proffession. For example, what's the return on investment for the worker that trained to be a professional car welder in Detroit? I don't know if "-100%" captures the loss.

Re: Capital vs. labor: who risks more?

#49

Post by runeks » Sat, Oct 25, 2014, 7:26 PM UTC

gamblor956 wrote: post #22

runeks wrote: post #16

Earlier quoted context omitted.

As I see it, the real problem is differentiating "income" and "capital gains". We all have a general sense of what each category refers to, but there are a lot of edge cases where it's difficult to say whether it's one or the other. If I'm a day-trader, buying and selling stocks, and making a living on this, is the profit income or capital gains? If we go by the logic that one shouldn't pay the same tax twice, then i…

If I'm a day-trader, buying and selling stocks, and making a living on this, is the profit income or capital gains? This is not an edge case; it's a well-settled point of law. Capital gains are related to the disposition of assets intended to be held for investment. Stocks are generally such assets and the disposition of stocks results in capital gain income (or capital losses). Apples are not intended for investment…

> Stocks are generally such assets and the disposition of stocks results in capital gain income (or capital losses). Apples are not intended for investment; they are intended for consumption.

Wheat is also intended for consumption, but it -- as with many other goods, consumable or not -- is also a commodity that is traded.

I realize I may have pointed out some edge cases that weren't actually edge cases. I am not a tax attorney, so I don't know what the law says.

I am only trying to point out that determining what is income and what is a capital gain is a hard problem, even though laws exist that try to put various activities into one of the two categories. The US uses an arbitrary 1-year limit, while the tax code of my country of residence (Denmark) says the tax rate is determined, not by how long the assets are held, but by trying to determine whether the profit constitutes ones primary source of income. If the answer is "yes", it's taxed as income.

So different countries use different methods to solve this problem of discerning income and capital gains, but I still maintain that it's a hard problem, that has not been solved adequately anywhere. And that there are many edge cases, resulting from current law, that are counter-intuitive.

Re: Capital vs. labor: who risks more?

#50

Post by SamReidHughes » Sat, Oct 25, 2014, 7:34 PM UTC

jekdoce wrote: post #8

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 interest on savings accounts taxed at income rates? Why is short-term capital gains taxed at income rates? While long-term capital gains are taxed at much lower rate. Seems like risk has something to do with it, no?

Short-term capital gains can be taxed more because there's less of a chance that you're just taxing inflation on capital that didn't grow very much, or shrank.