Man, I wish the poor would stop whining...Follow

Thats because in order to be in a position to effect the Laws on Tax breaks you must be wealthy.

I very much doubt a wealthy person is going to willingly change the rules that help him stay wealthy, my faith in human nature doesn't stretch that far.

Allakhazam Defender of Justice
Administrator wrote :



...That made me happy to pay my premium.

Hats off for the honesty there geezer!

Premium also helps those of us who work here and aren't independently wealthy =P

To be fair though, the guy picking mushrooms is paid for the "work". In your case, you were paid for your work (you generated an income, for which you were taxed normally). Along the way, you took something that had X value when you started, and increased its value. That's a wholly different thing.


The point of capital gains taxes being lower than income taxes is specifically to recognize this difference and to reward people who "build" economic constructs instead of just providing existing goods and services via labor. If we assume that the value of your business increased because it does more then it did when you started (or some other economic reason someone would be willing to shell out massive amounts of cash for it), then you did more then just provide a service and get paid for it, right? You also built something that provides more service then just you working yourself. You had more employees in 2006 then you did in 2000, right? Did they benefit because the "value" of your business increased?


While there's value to picking mushrooms, what you did has generated more value. You started with an idea and implemented something that benefits thousands (tens, maybe hundreds of thousands) of people. That's why you were rewarded with a lower tax rate. Sure. You'd have done this whether it became "big" or not, so it seems like free money to you, but your payment is based on how much what you did helped other people. And I don't think anyone can argue that you don't deserve your millions...

Ok, done laughing.

No one has ever argued that someone who works their butt off and happens to make millions from their efforts, doens't deserve it.

But explain to me again, why he only paid 15% tax on his earnings?

Something about a reward I think....

Yesssss, we get that. The burning question here is WHY is what Alla did somehow more valuable (and thus worthy of "rewarding" with absurdly low taxation) than the labor of the guy picking mushrooms? The "it serves as incentive to get people to create blah blah blah" thing doesn't wash. Why does Alla need more "incentive" to do what he does than the guy putting mushrooms on our table?

I just want to know where it's written in the US Tax Code that people deserve a lower tax % because the other guy couldn't sell his mushroom for a million bucks.

Edited, May 6th 2008 12:50pm by Kaelesh

I've got a friend who runs a mushroom farm. He says its a total scam.

He makes water into mushroom shapes (mushrooms are 98% water) using pooh from the local zoo and sells them at an obscene profit.

Irrelevant to the thread I know, but I wanted to do my bit to help it reach 10 pages.

Not at all.

I do see a benefit for lowering taxes paid by prospective farmers of organic produce tho.

Why not?

I currently put 20% of my income into investment. This means that every single paycheck gets cut by 20% off the top (after taxes as well!). I could just pocket the cash and spend that money on myself. I choose to invest it instead. That money then floats out in the economy, and is used to do such useless things as help fund the next new technological breakthrough, or perhaps (for investments in financial institutions), provide the cash backup to get you that loan you need to buy a house or start a new business.


Explain to me why I should be taxed at all if as a result of my investment, the value of whatever I've invested in increases? It wouldn't exist if people didn't set aside that money instead of spending it on themselves. I think that at some level, we ought to be rewarded for this. Certainly, these earnings (not income) shouldn't be taxed at the same rate as me spending X hours of my labor. I already paid that tax on the money. I could have taken it and left. Instead, I choose to put that money back at risk and hope that some gain occurs.


You need to do more then just say it should be taxed the same. Explain to me why...

By that logic the mushroom picker should not be taxed either. If he were not willing to pick the mushrooms the business would fail and everyone who relies upon the mushroom business would be out of work. Everyone who contributes to a company contributes value to them. Yes there are differences in value, but I imagine the owner is getting paid far more than the guy who picks mushrooms too.

Income is income as far as I am concerned. Unless you purchase stocks only at ipos, your stock investment is simply going into anther person's pocket. That's income. A stock is just a small ownership share in a company. The company makes money off it when it first sells it and can get loans based upon its stock valuation, but after the initial sale, the person who makes or loses the money on that individual piece of paper is just whoever owns it at the time. Stocks are just a way of making money off of your money and are no different than making money off of your labor. You do something (work or pay some guy for his stock) and then get paid. Of course with labor you almost always get money, and the amount per effort is low, and with stocks there is a chance you will lose money, but the potential amount per effort is much higher. I see no reason for taxing them differently.


For the sale of a company, the capital gains tax is even crazier. Before I sold it, Allakhazam was a flow through LLC. That meant that all profits from it flowed to myself and Andy as the owners and we paid the full tax rate on it (Well Andy didn't because he was Canadian, but that's another issue). So the government didn't consider me so altruistic then that they gave me any tax break then. However, when I was approached to sell it, the government threw in an incentive. Sell this now and the money gets a low tax rate. Even if you do make that much off it in the future, we will tax you far higher for that. It was the tax rate that was probably the final straw that convinced me to sell.

Do you wonder why companies are sold all the time. And the people who bought Allakhazam (Goldman Sachs for the most part) were just buying it so that they could combine it with other companies and build it up and likely will sell it off again either privately or through going public. If anything applying the capital gains taxes to the sale of a business destabilizes many businesses and encourages turnover over stability. In this case, everyone retained their jobs, but in many cases the employees of a company lose their jobs. It's easy to argue that low capital gains taxes cause economic turmoil for the many while benefiting only a few.

Sure. But he's getting paid directly for his labor. He may choose to work or not work, with the consequence of getting paid or not paid. It's a direct and "equitable" arrangement all by itself. The value he provides to the company may be a consideration with regard to continuing his employment and/or raises, promotions, etc, but isn't relevant in the broad sense of "what labor does". If he's unwilling to work at a given rate, either someone else will, or the owner will raise the rate for the labor. The process is self correcting to a great degree.




With the significant difference that those who just work there didn't have to put anything into the business to start. The owner starts out "in the hole" in this regard and has to hope that the profits of the business not only allow the business to stay afloat, but eventually earn him back his initial investment.

Another way to look at it is that if this particular business goes belly up, the worker simply looks for another job. His financial prospects may be impacted in the short run, but in the long run his ability to earn isn't affected much. His ability to pick mushrooms is what he's being paid for, and he hasn't lost that.

The owner, however, has lost potentially a significant portion of the money he started with (perhaps even all of it). He's lost far far more then the guy who works for him. Now certainly in the case of corporations, the owners are protected to some degree from this loss, but it's still a straight loss. If you invest a million dollars into a startup, and then it goes out of business, you get nothing back. Your money is lost. The labor you spent earning that million in the first place is lost.


It's a completely different thing IMO.



While you're correct about an IPO, it's still incorrect to say that later stock buys and sales don't matter. While it is just a transfer of that value from one person to another, there's still the "risk", that is not present in normal labor based income. That value still has to stick around (meaning someone has to assume the risk) in order for the business to continue. If you raise capital gains taxes, you reduce the likelihood for someone to want to assume that risk. Supply and demand process takes over and the "value" of those businesses plummets. That value is still significant in terms of the company itself, since it's representative of the original seed money used to start it up (the IPO value). For established production companies, this may not make much difference at all, but for any company still in the investment phase, it's a killer. It also affects all future such investment. Who's going to put money into an IPO if they know that no one will want to buy that stock off them later? What affect does that have on new companies? (huge IMO). What effect does that have long term on the research and development of new and better products? And what effect does that have on standard of living across the board going forward?


Also, that value clearly *does* go up over all, otherwise there'd be no reason to have a capital gains tax at all (or at least no benefit to it). If the market value of companies on average didn't increase at a rate faster then inflation, then total capital gains in the economy would never exceed total capital losses, and the net tax effect would be zero (or negative). Clearly, that's not the case (or we wouldn't be having the conversation). Therefore, clearly the mere act buying and selling stock (and its effect on innovation and efficiency improvement in the market) creates an increase in "value" across the board. The very act of investing is beneficial to the economy as a whole, even to those who don't invest themselves. It's a bit harder to see then direct labor, but it's incredibly important IMO.




Yes and no. You can only work so many hours a day. The money is an extension of that and represents the capability of a modern economy to grow beyond just the labor market. Take that away and we're back to some kind of mercantilism and/or land based economy. While it's easy to just dismiss it as "making money with money", that money represents some value. It's just a placeholder. You can pretend that the million dollars someone invests is a million dollars worth of labor (cause it can be). That person is contributing far far more then the guy picking mushrooms, and is doing so in a matter that gives more to others then he gets back (in fact returns on investment are usually only a small fraction of the amount you had to invest initially).




The dual factors of risk and front loaded benefit to others should not be ignored IMO. A laborer takes his pay for his work. One for one. Immediately. An investor pays first, then after whatever he paid for benefits others (successfully) and therefore increases in value, he gets paid for his "work". To qualify for the lowest tax rate on capital gains, you have to keep that investment "at risk" for 18 months. I don't know of many laborers willing to wait a year and a half to get paid...



Dunno. I just see huge differences between the two forms of income.

If you gained that income as a result of a process that did not directly take it from someone else *and* it took 18 months or longer to build, sure...


That's actually another factor I forgot to mention (thanks for reminding me). The assumption of capitalism is that when you combine materials, labor, and ideas in the right way, the whole ends up being greater then the sum of their parts. That's the "capital gain" that results. The actual value of that collection of things is greater then it was when you started as a result of being in a more useful format. Alla's site is a good example of this. All the data exists, but by putting it together in a useful format, you've created something of value.


It's also important to note that this did not detract from the value of those things in other contexts one bit. Alla "created" something of value (the capital gain parts anyway). He didn't take the value from someone else. When you play poker, every penny you make is a penny someone else loses. You gain. They pay. Labor is similarly zero-sum. For every X amount of labor, your employer pays you Y amount of money. You didn't "create wealth". You just exchanged one thing of value for another.


A capital gain represents an actual increase in value, not just an exchange of one thing of value for another. It's yet another way in which they are different. Certainly, if all we do is exchange things of equal value, no "new" value will be generated, right? It makes sense to reward those who act in a way that actually adds value to the system as a whole. Which is what capitalism does (and capital gains are the resulting increase in value).


I guess it really does come back to how you view wealth. If you see it as always being zero-sum (one loses it for another to gain it), then you wont see why capital gains should be any different then any other method of gaining income. If you see it as something that can be increased, not by just taking it from someone else, but by doing something "new" that increases the value of the whole, you'll see that this should be rewarded and encouraged. And given that our entire economy is based on the fact that this latter process does work (and works quite well), and our entire standard of living is as high as it is for the same reasons, it seems silly to cling to this outdated "zero-sum" model of wealth.


Many do for political reasons, but it doesn't make it any less incorrect.