I think profits sourced from direct labor are clearly close to wages. It's important to remember that in places like the UK, there are very different ways to o

I think profits sourced from direct labor are clearly close to wages. It's important to remember that in places like the UK, there are very different ways to offer that labour. In particular, as an employee, you have considerably more protection and are entitled to considerably more in other benefits than a freelancer or contractor who operates independently. As a reference point, you might expect an independent professional to charge roughly 150-200% of the equivalent salaried position in fees to compensate for the uncertainty, loss of benefits, overheads and other downsides that an employer takes care of for its employees. (This is of course ignoring the whole issue of now dealing with clients on a B2B basis instead of an employer-employee relationship, and therefore potentially pricing according to value rather than time, as often discussed elsewhere on HN.) Treating the income from dividends as if it were equivalent to a salary just means that either it's not cost-effective to go independent or clients have to bear the extra cost. Either way, someone is paying the difference if the work is still getting done at all, and like any activity that is taxed, that is an economic barrier that is not necessarily helpful if you're trying to promote a business environment where there is a flexible supply of labour through freelancers and where new businesses can start and grow.