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Earn millions from investing, via dividends and capital gains, pay 15% tax on it. The FICA 'wedge' on the first dollar earned by a minimum wage worker is 15.3%

Earn millions from investing, via dividends and capital gains, pay 15% tax on it. The FICA 'wedge' on the first dollar earned by a minimum wage worker is 15.3%. How is that fair, that Warren Buffett's secretary pays a higher tax rate than he does? And furthermore there are all kinds of ways of reducing the 15%, and all kinds of incentives for investment in the form of accelerated depreciation, deductibility of interest etc., and all kinds of easy ways to make labor income a dividend or capital income. Think of labor income as a return on human capital and the human as deserving of the same tax treatment as the factory or the tools. This notion that income from capital shouldn't be taxed or should be taxed less than income from labor is rent-seeking of the worst kind. Can a doctor can say, all human welfare, progress, income depends on health, etc. and I have mobility and can work anywhere in the world, so don't tax me? It's madness. Capital flows to places that have security, infrastructure, public health and education, and the taxes that pay for them.

jnordwick 11y ago
1- Taxing capital still harm those at the bottom of the ladder the most. Even if we accept what you say, we still shouldn't tax capital, but find better ways tax. Taxing capital gains and dividends still falls heavily, in secondary effects, on those least able to avoid it. 2- FICA is 20% an insurance policy and 80% a retirement plan that you get back when you retire. You actually get a better deal (you get more per dollar contributed if you are less wealthy). What you are really saying is you want the wealthy to pay for health insurance and retirement for those lower on the income ladder. You should really just own that position instead of trying to hide it. 3- > rent-seeking of the worst kind You and a large chunk of people don't seem to really understand that concept. Me buying a factory and in turn buying labor from people and making a return on that investment isn't anywhere close to rent seeking.
- RockyMcNuts 11y ago
  1 - please cite peer reviewed papers by legitimate economists (not rent-seeking lobbyists or nutbags, everyone knows who they are) 2 - it's a retirement plan when it's convenient to view it that way, a tax when it's not. Government views it as a tax when including it as tax revenue when calculating e.g. budget deficits. Right-wing pundits view it as a tax when talking about the size of big government. In terms of economic impact and incentive to work for wages I believe it acts mostly as a tax, just as you think incentives to invest are impacted by capital gains taxes etc. 3 - building a factory is not rent-seeking, saying your income from it should not be taxed is very transparently so and productivity growth increases surplus, it does not determine which factor of production the surplus accrues to. capital investment does not directly increase wages. labor supply and demand does. increasing productivity should usually shift labor demand higher, however trends in labor supply or structural factors that impact labor's bargaining position can sever the connection between productivity and labor demand (monopolies and monopsonies, import substitution, labor regs, labor's ability to organize etc.).

jnordwick 11y ago

1- Taxing capital still harm those at the bottom of the ladder the most. Even if we accept what you say, we still shouldn't tax capital, but find better ways tax. Taxing capital gains and dividends still falls heavily, in secondary effects, on those least able to avoid it. 2- FICA is 20% an insurance policy and 80% a retirement plan that you get back when you retire. You actually get a better deal (you get more per dollar contributed if you are less wealthy). What you are really saying is you want the wealthy to pay for health insurance and retirement for those lower on the income ladder. You should really just own that position instead of trying to hide it. 3- > rent-seeking of the worst kind You and a large chunk of people don't seem to really understand that concept. Me buying a factory and in turn buying labor from people and making a return on that investment isn't anywhere close to rent seeking.

RockyMcNuts 11y ago
1 - please cite peer reviewed papers by legitimate economists (not rent-seeking lobbyists or nutbags, everyone knows who they are) 2 - it's a retirement plan when it's convenient to view it that way, a tax when it's not. Government views it as a tax when including it as tax revenue when calculating e.g. budget deficits. Right-wing pundits view it as a tax when talking about the size of big government. In terms of economic impact and incentive to work for wages I believe it acts mostly as a tax, just as you think incentives to invest are impacted by capital gains taxes etc. 3 - building a factory is not rent-seeking, saying your income from it should not be taxed is very transparently so and productivity growth increases surplus, it does not determine which factor of production the surplus accrues to. capital investment does not directly increase wages. labor supply and demand does. increasing productivity should usually shift labor demand higher, however trends in labor supply or structural factors that impact labor's bargaining position can sever the connection between productivity and labor demand (monopolies and monopsonies, import substitution, labor regs, labor's ability to organize etc.).