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.
And without labor, the investor cannot make money, and no wealth can be generated. See how that works? Its a circular argument. That is not a reason to discriminate against labor. I'm not saying that capital should be taxed more than labor. They should be taxed equally. But you are saying that labor should be taxed more.
Besides, your supposition is wrong. Labor is not a commodity. If it were, then all wages would be the same. Kobe Bryant has a skill I don't have, and he gets paid more than me. Why should Kobe be taxed at a higher marginal rate than a hedge fund manager who makes the same amount of money?
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.
It is a matter of valuing investors over labor. You are contradicting yourself in both paragraphs. You are saying that speculation is more valuable than labor.
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.
This isn't about market prices. This is about levels of taxation. The market will set the market clearing prices for food and water. That has nothing to do with the level of taxation. Your argument is tantamount to the government deciding that food is more valuable than water, so water is taxed at a higher rate than food. And to make your analogy more complete, you are saying that junk food - i.e. speculation, aka "gambling" - should be taxed at a lower rate than water.
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.
You are contradicting yourself again. This is what you said.
- 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.
If the laborer is not paid and the company goes bankrupt, he is behind the claims of capital. He risks not getting paid. Often, employees of bankrupt companies lose part of their salaries owed. I don't have a problem with labor being behind the claims of capital, but it is not true that the labor has no risk.
Also, the difference between labor and risk capital is that risk capital can pay off spectacularly. Very, very few people get rich being paid a salary. Most people get rich risking capital. That's a good thing, mind you, and I'm all for that, but it is no reason to discriminate between earnings of capital and labor. As I'm sure you know, the fundamental premise of finance is the relationship between risk and reward. The higher the risk, the higher the reward. The lower the risk, the lower the reward. Implementing a tax regime that punishes low risk behavior is one that few economists would agree with.
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.
Well, you can say the same thing that by lowering the profit for labor, there will be less labor making wine and art. That's why there should be no discrimination between taxation on capital and labor.
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?
Excess investment lead to both the tech bubble and the housing bubble. That is called "mal-investment." It can be enormously damaging to an economy. Some argue that tax breaks to subsidize mortgages contributed to the bubble (though I don't necessarily agree with that).
But if you discriminate between taxes for capital and labor, you will discourage labor and encourage capital. You will have less labor and more capital. Since there will be excess capital in equilibrium, that will lower the returns on capital, which will destroy wealth.
In equilibrium, the marginal value of labor must equal the marginal value of capital. Think of an extreme example. If you taxed capital gains at 0% and labor at 100%, who would work? Everyone would speculate and be a capitalist, or at least those who were lucky enough to have capital to begin with. In your example, you discriminate against labor for capital.
