Online, a friend posted about the evil that is billionaires. One of the assertions was that the process of becoming a billionaire was immoral. I noted that a person who bought $10k in bitcoins in 2011 would have $2.2 Billion today just from the increase in value. When I asked if it was immoral to have gained on my own investment of my own money, they just doubled down on “Billionaires are evil.” I can see how a person feels that not sharing your immense wealth is evil. But that’s not what I asked them. My question to the dopers is, what harm, if any, does it do the poor if my $10k becomes $2.2B while sitting in my IRA account? It seems to me that all the wealth was generated on it’s own, not taken from anywhere or anyone else. This is not a problem I face, unfortunately, but I would still like to be educated on how my investing activities are hurting the working class.
I’m not sure how you can cash out $2.2 billion in bitcoins without taking money from anyone else.
What if I diversified the BC into other stocks? Would that inject the wealth into the stock market? Or is it an illusion since I am just trading one form of wealth into another while still keeping it?
Moderating: This is not merely a factual question; it’s either a debate or a matter for IMHO. I am moving it to GD, as it’s likely to become a debate.
RickJay
Moderator
I’m fine with the move. It is an emotional topic. But I really am interested in simply the facts of how wealth that was generated by the increase in value of a stock takes money from others.
Because at some point you will spend the money on something non-capital related. Like housing. You will drive up the price of housing, a drop in the bucket to you, but very impactful to people without the capital reserves that you have.
Taxes on capital gains max out at 20% while taxes on income max out at 37%. I feel this screws the poor because the money poor people earn is much more likely to be classed as income while the money rich people earn is much more likely to be classed as capital gains.
There’s also inequities on where the brackets are placed. For example, a person earning $42,000 a year via income is being taxed at 22% while a person earning $420,000 via capital gains is being taxed at 15%.
I feel that all the money people earn should be taxed at the same rates and brackets and there shouldn’t be any special low rates.
Your theoretical investment doesn’t hurt anyone.
Reality isn’t theory.
If you’re interested in why real billionaires hurt real working class people, then you’ll need to start a new thread about the world we actually live in.
Based on the thread title, this is what I thought the topic was going to be. But the original post seemed to be more along the lines of “Is it immoral to gain money by investing?” (answer: it depends).
Discussing tax rates may not have been the OP’s intent. But I feel it’s on topic. One of the main reasons people invest in capital gains are the opportunities for high profits and one of the main reasons those high profits exist is because of the favorable tax rates I described.
Yes, a big part of it is why the investment is growing. Something like Bitcoin doesn’t actually produce anything other than capital gains. Its value is based on nothing more than other people thinking it’s worth that, and so is prone to overnight collapse when people decide it’s no longer worth that much, just as in any other bubble.
But some investments grow because the value of the underlying stocks actually do grow, because the companies are actually making things. Microsoft and Apple really did build factories and produce products that real people actually bought, and they continue to do so. Sure, they were still immoral in part due to some anti-competitive business practices, so even those billionaires are questionable, but at least they really added something physical to the world. It wasn’t just a matter of convincing people with money to believe in a bubble.
I agree that leveling the tax structure would make things more fair and more moral. But, I am solidly middle class and don’t earn anywhere near $420K, and I do have investments for retirement that earn Capital Gains, and I pay the required taxes on such every year. I don’t have a ton, but we all need a nest-egg for retirement in this country for the years after we stop working full-time.
And investing is really the only way to build wealth. Jeff Bezos and Bill Gates became wealthy from working hard, but there aren’t enough hours in the day to work hard enough to earn 200x an average salary. Wealth (and security) is traditionally built from investing (real estate - you home, stocks, etc.). Everyone should have a pathway to building wealth and financial security, but yeah, once you have so much that you cannot spend it all in several lifetimes, it’s time to start giving it away. Capital Gains are not going to screw the poor nearly as much as a generally inequitable tax structure.
I’m not of the belief that investing well is akin to evil, nor that wealth itself is evil, and I would expect that the person who is making this argument is mostly making it along the lines of sour grapes. But, if they were knowledgeable enough about the situation, probably the best argument that I know of would be something like:
The drive for quick profits are a key factor in short-term thinking. This causes issues ranging from worker mistreatment to ecological destruction.
Much of this drive for quick profits comes from investors, seeking quick return on their investments. On average, they are unwilling to wait for 20-30 years before reaping the rewards of their investment, allowing the company to do things properly and with everyone’s best intentions (from the workers to the customers to the land) kept in mind. Any sense that the business isn’t driving to maximize profits in as quick a way as possible will lead investors to pick some other business to invest in, which will be wiling to do what it takes to get quick returns. Those businesses, using their larger capital pool and less morally constrained ways, will obviously be able to outcompete the slower and better-intentioned businesses, and either end up acquiring them or running them out of business.
This system has no balancing measure to mitigate this human urge and is inherently evil.
Again, this isn’t my view, but I think it would be close enough to reality that it would get some.
I agree. But there’s a gateway issue. You need to have some extra cash you can set aside in order to enter the investment system, even at the ground level. Once you’ve got in, you can re-invest the profits from your initial investments and increase the amount you have (or add new capital into the pool).
The point is that many people are too poor to ever be able to get started. If investing is, as you note, the only means of lifetime financial security, then our economic system is cruel in the way it won’t let so many people in the door. People like Allen and Bezos were able to start investing because they were born in well-off families. (Some biographies say Bezos grew up poor but that’s a selective version of his background.)
The only thing that mitigates this behavior is governmental oversight and regulations. But, as we see with some states, and countries, if you make it too hard to do business somewhere, then the business will move somewhere else that doesn’t have such a high-bar to operate.
Agree. This is a problem. I forget what the numbers are, but a substantial portion of Americans are living nearly or at paycheck-to-paycheck, with no disposable income, and no way to afford a sudden, unexpected bill. So, investing is not even on the table for a lot of people. As mentioned, adjusting the tax structure wouldn’t solve every problem, but it would reach a lot of people still, who today are otherwise unable to begin investing in their future.
And, ergo, I don’t agree with the view.
You’re basically asking “does capitalism screw the poor?” Which has been a very long-running debate with various brands of socialists and communists saying “absolutely” and other socialists saying “sometimes” and capitalists saying “rarely” or, if they’re being generous, “yes, but it’s still better than the alternatives”.
Whenever you leverage capital to multiply wealth, that is to some extent done by extracting value from the wage-earner. The excess value generated by the worker accrues to the owner of the machine/factory/company, including investors that don’t actually do any work at all but rather provide the capital for the business to operate.
So, absent a safety net, regressive taxation, and other forms of labor protection you can absolutely say that capitalism screws the poor (in the limited sense that they do not reap the full benefits of their labor). With those protections in place it can be argued that while the owners of the means of production certainly benefit more from capitalism than the wage laborers do, the overall system is still preferential, even for those laborers, than other economic systems tried to date.
On a related note, there are certainly moral frameworks in which having billions of dollars (or even a million or two) in a savings account while hundreds of thousands are starving is immoral. Most Americans tend to live with this immorality without thinking too hard about it.
Your argument would have been a lot stronger if you had actually picked a case where wealth was generated.
Specific reciprocity, such as the money system, screws everyone and intrinsically screws the poor the worst, by far.
Having a chunk of money makes it far easier to obtain the next chunk of money than if you had none at all. That is intrinsically unfair, making the money system very obviously not an equitable system for reward for one’s efforts.
Capital gains is just one minor form of the process.
It’s not that any investment that hurts the working class. After all, a savings account at your local community coop is being invested into the local community, which helps everyone in the community increase services and infrastructure.
The problem is becoming a billionaire–it’s the scale of it. No one needs billions. It’s a level of wealth that is too far out of proportion to what any moral person should have. There’s a fuzzy line that can be debated “how rich is too rich?”, but billionaire is definitely on the too-rich side of the line.
I don’t know that extreme wealth screws the poor in particular. All stressors affect the poor more than the others, because the poor have fewer resources to deal with it.