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Why is income from money, you know that which is earned because you have lots of capital, taxed at a much lower rate than incoming from labor? The < 1% are hidi

by x5n1 11y ago

Why is income from money, you know that which is earned because you have lots of capital, taxed at a much lower rate than incoming from labor? The < 1% are hiding their money in plain sight and not paying the same level of taxes as people who trade their labor for money.

ska 11y ago
Partially from economic theories about the use of capital in a market economy. Partially because the socio-economic class of people who benefit from such tax laws overlaps heavily with the socio-economic class of people who create tax laws.
- rlucas 11y ago
  Please don't forget the economic theorizers, and the subtle and not-so-subtle pressures that keep them in line. (Put another way: in "[1] economic theories about the use of [2] capital in a [3] market economy" there's a whole lot of assumptions and underpinnings, at least three of them, that are not laws of physics, but rather are ways of perpetuating and recapitulating our present system.)
  - ska 11y ago
    I fail to see how my statement did not include what you are saying, or how it suggested anything else.
    - rlucas 11y ago
      Wanted to give the same critical emphasis to the economic theory explanation as you had given to the socioeconomic class interest bit. The statement articulated two "parts" of the explanation. The second "part" was phrased as a matter of class self-interest, with a critical tone. But the phrasing of the first, as being "from" economic theories, can very easily be read as giving those theories a pass, esp. in environments like HN. If we wanted to explain with some finality, we might answer, "why do we mandate lead shielding around radioisotopes" by saying the reason is "from physical and biochemical theories [about harm from ionizing your DNA]." Or we might answer, "why are some traits observed to be epigenetic / both heritable and environmental" by saying the reason is "from biological theories." The appeal to science-y authority is pretty conversation-ending in technically-oriented conversation venues like HN, I find. Or more properly, it might not end conversations but it makes that piece a leaf node. I just like to remind people that economic theories are far, far more than their hard-science counterparts, political products.
      - ska 11y ago
        Ok, I guess that makes more sense now. I do t see the imbalance of emphasis you read in it, but that is fine.
merpnderp 11y ago
There is a reason for this though. Money earned from labor is under contract and assured. Money earned from capital is earned from risking the loss of that capital. Taxing it higher is the opposite of a solution as it will just make the corruption which allows rent buying, protectively burdensome regulations, and all the other tenants of crony capitalism all the more profitable. Busting up trusts and forcing more competition is the best way to lower profits on risk.
- x5n1 11y ago
  There is a difference between being able to write off losses, and the rate at which gains are taxed. Not to mention much of that capital in fact > 90% of it belongs to a very small number of people who are not risking a thing. If you know that 30% of your investment will pay off and that payoff will more than make up for your loss, and you invest maybe 5-10% of your assets on that. You are taking virtually no real risk whatsoever. Employment can be lost, discretionary income is limited, and usually the income is barely enough for you to get by after all the costs of things like retirement are accounted for.
mfringel 11y ago
Capital can move away from taxation much faster than labor, so capital has to be taxed at the maximum possible rate that does not encourage too much of it to move away from the taxing authority in question.
- cmrdporcupine 11y ago
  But capital can move away from taxation much more quickly than labour because the political institutions that capital controls _have made it that way_. As an example: we got a "North American Free Trade Agreement" which allowed mostly free movement of capital between borders, but at no time was it even considered that labour would be able to freely move. Even for people like myself who are skilled in software, etc. it is quite difficult. All of this is to reiterate what another poster said above: the people who control large amounts of capital have an outsized influence on the way tax _and trade_ laws are written.
matt_wulfeck 11y ago
> not paying the same level of taxes as people who trade their labor for money. 20% (long term capital gains) of a million dollars is still $200k, so not sure why you would say they aren't paying taxes. Not to mention the sales and state taxes that rich people pay when they buy their toys. Or is it just you somehow deserve the money more then them because they don't work hard / were born into wealth / are tax dodgers etc.
matt_wulfeck 11y ago
One way to think of it is an alternative tax rate, but it's also a minimum tax rate. It also incentivizes certain practices that are beneficial for everyone, such as holding stocks for many years instead of day trading. If you were paid once every year instead of every week should both be taxed the same?

by x5n1 11y ago

ska 11y ago

Partially from economic theories about the use of capital in a market economy. Partially because the socio-economic class of people who benefit from such tax laws overlaps heavily with the socio-economic class of people who create tax laws.

rlucas 11y ago
Please don't forget the economic theorizers, and the subtle and not-so-subtle pressures that keep them in line. (Put another way: in "[1] economic theories about the use of [2] capital in a [3] market economy" there's a whole lot of assumptions and underpinnings, at least three of them, that are not laws of physics, but rather are ways of perpetuating and recapitulating our present system.)
- ska 11y ago
  I fail to see how my statement did not include what you are saying, or how it suggested anything else.
  - rlucas 11y ago
    Wanted to give the same critical emphasis to the economic theory explanation as you had given to the socioeconomic class interest bit. The statement articulated two "parts" of the explanation. The second "part" was phrased as a matter of class self-interest, with a critical tone. But the phrasing of the first, as being "from" economic theories, can very easily be read as giving those theories a pass, esp. in environments like HN. If we wanted to explain with some finality, we might answer, "why do we mandate lead shielding around radioisotopes" by saying the reason is "from physical and biochemical theories [about harm from ionizing your DNA]." Or we might answer, "why are some traits observed to be epigenetic / both heritable and environmental" by saying the reason is "from biological theories." The appeal to science-y authority is pretty conversation-ending in technically-oriented conversation venues like HN, I find. Or more properly, it might not end conversations but it makes that piece a leaf node. I just like to remind people that economic theories are far, far more than their hard-science counterparts, political products.
    - ska 11y ago
      Ok, I guess that makes more sense now. I do t see the imbalance of emphasis you read in it, but that is fine.

merpnderp 11y ago

There is a reason for this though. Money earned from labor is under contract and assured. Money earned from capital is earned from risking the loss of that capital. Taxing it higher is the opposite of a solution as it will just make the corruption which allows rent buying, protectively burdensome regulations, and all the other tenants of crony capitalism all the more profitable. Busting up trusts and forcing more competition is the best way to lower profits on risk.

x5n1 11y ago
There is a difference between being able to write off losses, and the rate at which gains are taxed. Not to mention much of that capital in fact > 90% of it belongs to a very small number of people who are not risking a thing. If you know that 30% of your investment will pay off and that payoff will more than make up for your loss, and you invest maybe 5-10% of your assets on that. You are taking virtually no real risk whatsoever. Employment can be lost, discretionary income is limited, and usually the income is barely enough for you to get by after all the costs of things like retirement are accounted for.

mfringel 11y ago

Capital can move away from taxation much faster than labor, so capital has to be taxed at the maximum possible rate that does not encourage too much of it to move away from the taxing authority in question.

cmrdporcupine 11y ago
But capital can move away from taxation much more quickly than labour because the political institutions that capital controls _have made it that way_. As an example: we got a "North American Free Trade Agreement" which allowed mostly free movement of capital between borders, but at no time was it even considered that labour would be able to freely move. Even for people like myself who are skilled in software, etc. it is quite difficult. All of this is to reiterate what another poster said above: the people who control large amounts of capital have an outsized influence on the way tax _and trade_ laws are written.

matt_wulfeck 11y ago

> not paying the same level of taxes as people who trade their labor for money. 20% (long term capital gains) of a million dollars is still $200k, so not sure why you would say they aren't paying taxes. Not to mention the sales and state taxes that rich people pay when they buy their toys. Or is it just you somehow deserve the money more then them because they don't work hard / were born into wealth / are tax dodgers etc.

matt_wulfeck 11y ago

One way to think of it is an alternative tax rate, but it's also a minimum tax rate. It also incentivizes certain practices that are beneficial for everyone, such as holding stocks for many years instead of day trading. If you were paid once every year instead of every week should both be taxed the same?