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Comment by legitster | Hacker News Reader

To me it is pretty ridiculous how much labor is taxed, and how little capital is taxed. Especially if we are worried about automation and lack of productivity growth, it seems so counter-intuitive that we are completely stuck to a tax system that devalues workers.

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The reason is simple: labor has less options. Capital can mostly go where it pleases - if it is taxed too much it might flee the country. But your 160 million workers aren't going to uproot themselves and move to another country because they're too heavily taxed.

Honestly, where would it go? The US Treasury sets the bond price and no one is turning it down even with completely shitty returns (like 1-2%!). If capital flees they can go to an even higher tax country in the EU. They can go to a negative return country like Switzerland. They could go to China, but guess what, it's a one way trip!

I bet if lawmakers said capital gains tax is bumped to 20% everyone of them would bitch and moan for 30 minutes, and then pay the damn tax.

You mean the same lawmakers that sit on the boards of so many multinational corporations? Might as well ask for world peace.

Are you thinking of any specific one out of the "so many" examples, or are you assuming? Because for Senators, it's illegal to sit on a corporate board, and for Members of Congress, it's only legal if the position is unpaid: https://politics.stackexchange.com/questions/10976/legislati....

However their relatives can sit on boards, so a senator's spouse would be fair game. And they can use the paid board gig to make money between terms.

Susan Bayh, ex senator and governor from and Indiana married to another senator, sat on multiple boards between her own political terms and while her husband was in office (also while she was governor). She's been on at least 14 boards in total: https://en.wikipedia.org/wiki/Susan_Bayh

Are you suggesting that spouses of Congressmen shouldn't be permitted to sit on corporate boards? (And presumably, should be excluded from any of a range of careers in the private sector.)

No, I'm just claiming policy makers can be influenced by corporate boardrooms. I don't really have a solution for it, and I can't really say that I know whether or not this is a big problem that needs solving, but is there legal ways for companies to use board positions to affect policy makers? Yes.

Personally, I don't think it's the worst. I would rather they had to do this than get huge retirement packages as they do in my country after their service. Also, if their spouses can make a living being involved in business so politicians can't use sympathy for their poor family as leverage to get higher compensation that would be good too. But we can't handwave the issue of corporate influence over politicians however we choose to deal with this.

Wait, since when was she a senator and governor?

"Unpaid", but members of congress are allowed to inside trade, and their portfolios are curiously successful.

See: https://pdfs.semanticscholar.org/c294/8992cb8681c41dbb1d163f...

They can get around that through the "revolving door" between legislators and lobbying groups: opensecrets.org/revolving/

The old "you pass legislation that we want, and we'll have a seat waiting for you on the board after your term is over, with a nice paycheck attached".

If it were me, I would consider moving my money to Latin America. Not Mexico of course, due to the recent election, but definitely would research the regions and political climates of our southern neighbors.

Sounds like you should probably start researching now if a 20% capital gains rate makes you think "Latin America" outweighs an additional 5% in taxes.

You plan to invest in a market you know little about. You should definitely do your research. The five largest markets in Latin America are:

Brazil

Mexico

Argentina

Venezuela

Ecuador

2 have a problem paying their bills on time. If you don't like Mexico I have some unfortunate news for you regarding Ecuador.

So that leaves Venezuela...

Well, they don't need to go anywhere. But their money can go anywhere and vanish in complex shell constructs, as it already does.

That's the problem, they wouldn't just moan for 30 minutes. They would spend money to have the tax reduced which I'm assuming is the only reason the tax isn't at 0% because it's not worth it for them to push it below 15%.

"Spend the money" = "lobbying" = legalized bribery, and sometimes blackmail.

Regulatory capture is the biggest enemy of free markets.

> The reason is simple: labor has less options. Capital can mostly go where it pleases - if it is taxed too much it might flee the country.

That's not a law of nature, just an artifact of the current legal regime. It would definitely be a challenge to update the law to make it harder for capital to hop between jurisdictions to avoid tax, but it's also a challenge to collect individual income tax, so I think it'd be doable if the political will was there.

> Capital can mostly go where it pleases

Historically this was not the case at all. It's only during the modern neoliberal era that this is true.

Thing to remember Capital isn't a primary resource like energy, infrastructure, materials, and labor.

Though I agree with you to a point, I'm careful not to take this first pass understanding too far. A socially cohesive society with well funded infrastructure, reliable courts, low inflation, stable interest rates, and an educated populace makes for a very attractive investment area.

Sweden has a capital gains tax of 30%, two to three times that of America and they have a similar GDP per capita, depending on the year.

Tax land; you can't just walk off with that.

That's a start, but land is only a small fraction of capital.

>> it seems so counter-intuitive that we are completely stuck to a tax system that devalues workers.

Old people. Retired people live on money gathered from ownership of things. Since old people have the most political power it should be no surprise that the tax code favors their capital gains over working wage earners. In the days when the boomers were young and in work (50s 60s) the tax code was very different.

We defined work and productivity as the end in it self but it's not. We regard automation as the main cause of unemployment but what was the automation that produced the unemployment and underemployment that we are seeing right now? The main cause of unemployment is that we built the infrastructure that we need and now we only need to maintain it, and that requires much less work. The problem is that we depend on employment to redistribute wealth we are destroying the planet doing stuff that we don't need.

Who is worried about automation and lack of productivity growth? Seems like the worry is over inequality.

People who would rather not change the balance of power between labor and capital worry about lack of productivity growth, because up until recently productivity growth was the bandaid hiding the underlying problems with inequality. As productivity growth stops, we have to address the actual problems, and certain people would rather not.

But Steven Pinker and Bill gates said things are better than ever before.

It always seemed to me that losing X hours of your life every day to perform the labor was tax enough.

It's not counter-intuitive if you look at who makes the laws.

The system is one where back-scratching, ass-covering, and kickback-giving is the norm. It's surprising there's any tax on capital at all. A few more rounds of conservatives in power might take care of that.

Conservative anti-tax crusader Grover Norquist once said, "I don't want to abolish government. I simply want to reduce it to the size where I can drag it into the bathroom and drown it in the bathtub."

These are the kinds of people who are running the show these days.

Those are the kinds of people that are astonished at what those running the show are doing these days.

Conservative pundits from the 1990s are rabid leftists by the standards of the current regime. Richard Nixon would be branded a communist!

Populism, nationalism, and authoritarianism don’t map neatly onto a one-dimensional left-right axis.

Yeah, well, tell that to Fox News.

From Wikipedia:

> Grover Glenn Norquist (born October 19, 1956) is an American political advocate who is founder and president of Americans for Tax Reform, an organization that opposes all tax increases. A Republican,[4] he is the primary promoter of the "Taxpayer Protection Pledge", a pledge signed by lawmakers who agree to oppose increases in marginal income tax rates for individuals and businesses, as well as net reductions or eliminations of deductions and credits without a matching reduced tax rate.

Sounds like he wants to lower individual's income taxes. Letting people keep the money they earn hardly seems anti-labor.

When that means that government also has fewer resources available to enforce labor laws, that's a very anti-labor stance.

We have to take your money so those other scoundrels won’t take your money!

define "we".

> define "we".

People who want to avoid violent revolution, which historically has occurred when inequality has reached a certain threshold.

https://www.marketwatch.com/story/want-to-level-income-inequ...

https://www.economist.com/books-and-arts/2017/03/02/the-less...

Either you fix the system or the system fixes you.

When you grind people down so much that tens of millions have nothing left to lose, watch out.

This is correct but it's also rewording the parent comment. There is reason to be legitimately concerned that things might be on fire in a year or two, it would be very good for the US government to take actions to prevent that for the benefit of the people who are being ground down and, for bonus points, it would be in the best interest of the people grinding others down!

Why do you think the Bush family and thousands of others like them have swathes of land with bountiful resources in other countries?

They have an escape plan when it gets real. You and I probably don't.

That's not an escape plan, that's just what wealthy people do. They own things.

Peter Thiel's jockeying for New Zealand citizenship however is an escape plan.

Also, the general sentiment is "Well, I'll/someone will worry about that later, today, I need to get mine (money&power)." See: decisions for short term stock price growth vs decisions for actual company improvement over long term.

Top corporate tax rate in 2017: 35%. [1]

Typical individual income tax: 30%. [2]

[1] https://www.thebalancesmb.com/corporate-tax-rates-and-tax-ca...

[2] https://www.fool.com/retirement/2017/03/04/whats-the-average...

Absolutely nobody pays the actual statutory corporate tax rate, the average tax rate paid by US business after applying loopholes and so on is 22-24%: [1], and about a fifth of profitable companies pay no tax at all: [2]. This is so well-known and obvious that even mentioning the 35% rate at all is evidence of bad-faith arguing.

[1] https://www.cbpp.org/research/federal-tax/actual-us-corporat...

[2] https://www.forbes.com/sites/eriksherman/2017/04/24/trumps-c...

It's not even a relevant comparison. "Corporations" don't spend profits on luxuries for themselves. Their human owners do. Owners pay capital gains tax (which you can argue is too high or low or too easily avoided.)

You are making my point for me. Corporate profits are double-taxed. In 2017 the corporate profits would be taxed at 35% before distribution, and then once again at 20% after distribution (to the shareholders), for a cumulative tax rate from the profit made by a business to the money in the investor's pocket of 48%.

The HN guidelines stipulate that you assume good faith: https://news.ycombinator.com/newsguidelines.html

Do you?

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