The Flawed Concept of "Wealth Redistribution"

[boedicca]

By your logic, because a person risks something, they should be taxed at a lower rate. Well, what if I risk my money at the cards tables in Vegas? Or I decide to speculate in art or fine wines? How is that any different than speculating in stocks or bonds or commodities? After all, I'm risking losing my money.

In your "safe" labor analogy, unlike capital, the laborer cannot write-off his losses. In the tax code, if you lose money on your capital, you can write that off against future income, lowering your taxes in the future. That is the compensation for risking capital.

Oh Gawd. This is like shooting fish in a barrel.

What don't you get about the benefit to labor productivity via the application of invested capital?

- Gambling in Vegas is not investing (and it is short term).

- Art and fine wines held for longer than a year do qualify for capital gains.

- A laborer who is not paid the wage he is owed has recourse to sue the deadbeat employer. It is a fee for service arrangement. FF has already pointed that out.

- Having the compensation for risking capital be the ability to write off losses is Insanely Stupid - what good does pouring money into guaranteed losing propositions just to game the tax code do for the economy or the investor as opposed to choosing what are better investments?

 

[PatekPhilippe]

Art and fine wines held for longer than a year do qualify for capital gains.

Uh oh...you mean the 4 bottles of Dom Perignon Rose`1998 and the case of Crystal 1996 were supposed to be reported on my tax return?

 

[boedicca]

Art and fine wines held for longer than a year do qualify for capital gains.

Uh oh...you mean the 4 bottles of Dom Perignon Rose`1998 and the case of Crystal 1996 were supposed to be reported on my tax return?

Only if you sell them. Then yes, technically you are required to report the gain.

 

[PatekPhilippe]

Art and fine wines held for longer than a year do qualify for capital gains.

Uh oh...you mean the 4 bottles of Dom Perignon Rose`1998 and the case of Crystal 1996 were supposed to be reported on my tax return?

Only if you sell them. Then yes, technically you are required to report the gain.

Good...I plan on drinking them.

 

[Toro]

Oh Gawd. This is like shooting fish in a barrel.

It sure is.

What don't you get about the benefit to labor productivity via the application of invested capital?

I don't get why you value labor less than capital.

- Gambling in Vegas is not investing (and it is short term).

Fox was arguing that what matters is whether you risk losing money or not when differentiating tax rates between labor and capital.

- Art and fine wines held for longer than a year do qualify for capital gains.

Are you saying that someone who speculates in art and wine should pay a lower rate of tax than someone who draws a salary?

- A laborer who is not paid the wage he is owed has recourse to sue the deadbeat employer. It is a fee for service arrangement. FF has already pointed that out.

So you are contradicting Fox then? Fox said that labor is "safe."

- Having the compensation for risking capital be the ability to write off losses is Insanely Stupid - what good does pouring money into guaranteed losing propositions just to game the tax code do for the economy or the investor as opposed to choosing what are better investments?

Its not about guaranteed losing propositions. It is about being compensated for risk capital. Just like if you earn capital gains, you should be taxed on it, if you lose money, you should receive tax credits. Corporations have this too. That's perfectly logical and reasonable. What isn't reasonable is the $3000 limit on losses. It should be much higher.

 

[Gadawg73]

Wealth is never to be redistributed.
Wealth is and should always be EARNED.

 

[rdean]

No group of people understand "wealth redistribution" better than Republicans.

In spite of two wars, Republicans, using the process of "reconciliation" passed a 1.8 TRILLION DOLLAR tax cut package to the American people. On the surface, it doesn't look like "redistribution" until it's clear how the "wealth" was divided up.

More than half of those "tax cuts" went to the top 5%. But that's the top 5% of people who actually pay taxes. The number of people actually receiving the money might be as little as 3 or 2% of the population or even less. Imagine, 2% of the tax paying part of the American population receiving nearly a TRILLION DOLLARS.

This is called, "Republicans managing the economy using the process of reconciliation".

Now, to those Republicans on this board, if this isn't what happened, please explain what did. Try to show some self control, leave aside the name calling, just explain the facts. It would be greatly appreciated.

Oh, and who pays for those two wars?

 

[DiamondDave]

We have been having a redistribution of wealth for the last 30 years as the top 5% of the population has benefited from relaxed tax and business regulations and the standard of living for the remaining 95% of the population has diminished

I agree that the redistribution of wealth has been bad for the country

What groups pay the highest tax rates and the vast majority of the tax burden?? What % of people pay no income tax whatsoever and benefit greatly from entitlements at the expense of those who pay taxes?

 

[Foxfyre]

Glad I live simply on my retirement and don't have to worry about all this.

Makes my head hurt.

Good thing Indeed. Obama is EYEING those of us with 401k's and means to confiscate them to pay for his spending...

You're right. That was one of those things Obama mentioned in passing and that should have generated a good deal more attention than it did. I don't know if he is eyeing those of us who no longer have our 401K, IRA's etc. in employer plans, but he sure is thinking about taking over those employer plans.

Note about the third paragraph here that would illustrate the impact that could have on those who are competently managing their 401K plans:

Is Obama going to Nationalize 401k Plans? - Business Exchange

 

[Dr Grump]

Wealth is never to be redistributed.
Wealth is and should always be EARNED.

So if a multi-million dies his estate should go to the state, not his beneficiaries (after all, they didn't earn it)....

 

[Ringel05]

Wealth is never to be redistributed.
Wealth is and should always be EARNED.

So if a multi-million dies his estate should go to the state, not his beneficiaries (after all, they didn't earn it)....

You wouldn't happen to be a White House spokesperson would you? Nice twist. Obfuscate much?

 

[Foxfyre]

Oh Gawd. This is like shooting fish in a barrel.

It sure is.

What don't you get about the benefit to labor productivity via the application of invested capital?

I don't get why you value labor less than capital.

It isn't a matter of which is valued more. It is a matter of the economic dynamics associated with each.

A labor pool is a resource. Labor itself is a commodity--something that has a fixed value and is bought and sold. The value of the product produced by labor increase the wealth of the employer and the earnings received increase the wealth of the laborer. Such wealth then becomes a new resource.

The employer takes a risk when he contracts with the laborer. He is risking wages and benefits and time and other resources by speculating that the laborer will produce as much or more product than the cost of the labor. If the laborer produces less, the employer loses on his investment.

Without the employer taking the risk, however, no wealth is generated for anybody.

The investor in stocks, bonds, real estate, like the employer, is also speculating that his investment will increase in value and thus create a capital gain. If it does, he has increased his wealth and those whom he buys his investments from also see their wealth increased. Without the investor taking the risk, property sits unsold, municipalities and other entities are handicapped in being able to efficiently expand their services, and companies are less able to grow and create jobs and more wealth.

It isn't a matter of valuing investors over labor. They are two very different things, and incorporate very different things involving very different economic dynamics. Both are necessary in order for wealth to be created.

Do you value food or water more? Or do you see them as equally necessary to sustain life? And yet you do not expect to pay as much for your water as you do for food. Why? because the process for each is very different.

Fox was arguing that what matters is whether you risk losing money or not when differentiating tax rates between labor and capital.

The investor needs a profit margin in order to be able to responsibly take on the risk. The laborer takes no risk at all. He gets paid whether his employer profits or not.

Are you saying that someone who speculates in art and wine should pay a lower rate of tax than someone who draws a salary?

I don't know if that is what Boedicca is saying, but that is what I am saying. Make it more difficult and risky by lowering the profit for that investor to speculate on that art and wine, and there is likely to be far fewer salaries available to the artist or those guys working in the winefields.

- A laborer who is not paid the wage he is owed has recourse to sue the deadbeat employer. It is a fee for service arrangement. FF has already pointed that out.

So you are contradicting Fox then? Fox said that labor is "safe."

Yes labor is safe from all of the risk assumed by the investor. The laborer gets a guaranteed wage for services rendered via verbal or written contract. An investor has no such guarantee.

- Having the compensation for risking capital be the ability to write off losses is Insanely Stupid - what good does pouring money into guaranteed losing propositions just to game the tax code do for the economy or the investor as opposed to choosing what are better investments?

Its not about guaranteed losing propositions. It is about being compensated for risk capital. Just like if you earn capital gains, you should be taxed on it, if you lose money, you should receive tax credits. Corporations have this too. That's perfectly logical and reasonable. What isn't reasonable is the $3000 limit on losses. It should be much higher.

It really comes down to this. If lowering or removing capital gains taxes frees up property and encourages more investment that results in greater economic activity that results in more and better jobs and benefits, why would you object to that? Who could that possibly hurt? What is the downside to that?

 

[The Rabbi]

We don't distinguish people who have cap gains as their primary income and people who don't. All capital gains is taxed at the same rate.
The reason it receives favorable treatment is that it is the source of capital formation, fueling growth in the economy.

That's not true. Short-term capital gains are taxed at 28%, long-term capital gains, i.e. held 366 days or longer, are taxed at 15%.

Why should capital be treated any different than labor? As any econ 101 student knows, both labor and capital are the two critical inputs to economic output. Why should be discriminate against labor relative to capital?

I meant taxed at the same rate for each person. It doesnt matter whether your long or short term gain is your entire income or a small part of it.

We favor capital formation in this country in part because labor has gotten so expensive. Thus we are substituting.
In any case, who said the tax code had to be fair? Why do we not tax primary home sales, even though it is an asset and often results in a sizable taxable gain?
And again, if you are feeling guilty about it, write an extra check to the IRS.

 

[rightwinger]

We have been having a redistribution of wealth for the last 30 years as the top 5% of the population has benefited from relaxed tax and business regulations and the standard of living for the remaining 95% of the population has diminished

I agree that the redistribution of wealth has been bad for the country

What groups pay the highest tax rates and the vast majority of the tax burden?? What % of people pay no income tax whatsoever and benefit greatly from entitlements at the expense of those who pay taxes?

Thats a tough one.....

Let me think a minute...........................Oh!....I got it

The group that comprises 1% of the population and monopolizes 34% of the wealth pays that most taxes
While the group that comprises 40% of the population and controls .2% of the wealth pays relatively little

The solution of conservatives is that we need to target the portion of the population that controls .2% of the wealth

Rocket science....pure rocket science

 

[rightwinger]

We have been having a redistribution of wealth for the last 30 years as the top 5% of the population has benefited from relaxed tax and business regulations and the standard of living for the remaining 95% of the population has diminished

I agree that the redistribution of wealth has been bad for the country

Wealth re-distribution does nothing more than LOWER EVERYONE'S standard of living, it does ABSOLUTELY nothing to INCREASE ANYONE'S standard of living. It really should be titled '"SHARED MISERY," redistribution.

We have already had a wealth redistribution..

It has gone from working class Americans to the super wealthy

God forbid we try to reverse the trend

 

[Claudette]

I often wonder what would happen if there were no wealthy, you know, the top 5% of Americans available to tax??

Wonder who whould be paying the lions share of taxes then??

 

[rightwinger]

I often wonder what would happen if there were no wealthy, you know, the top 5% of Americans available to tax??

Wonder who whould be paying the lions share of taxes then??

The money does not disappear. It would be still be subject to taxation

 

[Care4all]

I often wonder what would happen if there were no wealthy, you know, the top 5% of Americans available to tax??

Wonder who whould be paying the lions share of taxes then??

if the middle class had more money then they would pick up the difference imo.... I don't think taxes would just stop flowing in if the wealthiest among us had less of their wealth, and the middle class workers had a little more of the wealth to be had.

But I agree with you on the concept....the successful, the generous wealthy are needed to give charity, to help out those with the least...they are an important part of keeping society together and the poorest among us fed and clothed...

If everyone were poor and there were no generous wealthy, we'd ALL be crap out of luck!

 

[The Rabbi]

We have been having a redistribution of wealth for the last 30 years as the top 5% of the population has benefited from relaxed tax and business regulations and the standard of living for the remaining 95% of the population has diminished

I agree that the redistribution of wealth has been bad for the country

What groups pay the highest tax rates and the vast majority of the tax burden?? What % of people pay no income tax whatsoever and benefit greatly from entitlements at the expense of those who pay taxes?

Thats a tough one.....

Let me think a minute...........................Oh!....I got it

The group that comprises 1% of the population and monopolizes 34% of the wealth pays that most taxes
While the group that comprises 40% of the population and controls .2% of the wealth pays relatively little

The solution of conservatives is that we need to target the portion of the population that controls .2% of the wealth

Rocket science....pure rocket science

Wealth and income are not the same thing. I wish people would get it right.

And if you look at the top 5% of income earners over the years you quickly discover they aren't the same people year after year.

 

[DiamondDave]

We have been having a redistribution of wealth for the last 30 years as the top 5% of the population has benefited from relaxed tax and business regulations and the standard of living for the remaining 95% of the population has diminished

I agree that the redistribution of wealth has been bad for the country

What groups pay the highest tax rates and the vast majority of the tax burden?? What % of people pay no income tax whatsoever and benefit greatly from entitlements at the expense of those who pay taxes?

Thats a tough one.....

Let me think a minute...........................Oh!....I got it

The group that comprises 1% of the population and monopolizes 34% of the wealth pays that most taxes
While the group that comprises 40% of the population and controls .2% of the wealth pays relatively little

The solution of conservatives is that we need to target the portion of the population that controls .2% of the wealth

Rocket science....pure rocket science

No idiot

Target nobody.... treat with across the board equality... as justice is blind, so should taxation be

Taxation on all income the exact same % on every dollar earned by every citizen...

And BTW.... what you have accumulated before is of no concern to anyone, including the government... I don't care if you have $5BIL sitting in a safe... you get taxed on the income, not on what you have amassed