# Do Capital Gains Screw the Poor? **URL:** \ **Category:** Great Debates\ **Created:** [July 5, 2023, 2:37pm UTC](https://boards.straightdope.com/t/do-capital-gains-screw-the-poor/986644 "2023-07-05T14:37:13Z")\ **Posts on this page:** 20\ **Page:** 2
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [July 5, 2023, 6:12pm UTC](https://boards.straightdope.com/t/do-capital-gains-screw-the-poor/986644/21 "2023-07-05T18:12:59Z")
> [@Hypno-Toad](#): > > 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. Your theoretical investment, having no inherent value, is worth nothing unless someone wants to buy it. If Bitcoin values always go up, possibly no one is hurt, but the person who pays you $2.2 billion just before the Bitcoin market tanks is. I think it is possible to make the case that investments that depend on the greater fool are basically immoral. To make explicit what others have said about it depending on the type of investment, investing in a startup that could build wealth for many people, and create jobs, is pretty clean. Investing in funds like Mitt Romney’s that buy up companies, leverage them like hell, and then get suckers to invest as they die is not so moral. ---
**Author:** ![Sage\_Rat](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/sage_rat/32/399_2.png) [@Sage\_Rat](https://boards.straightdope.com/u/Sage_Rat)\ **Post date:** [July 5, 2023, 6:42pm UTC](https://boards.straightdope.com/t/do-capital-gains-screw-the-poor/986644/22 "2023-07-05T18:42:45Z")
> [@Pleonast](#): > > 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 actually don’t think it’s very fuzzy. I’ve run linear regressions on statistics proposed to be caustive of increased homicide rates (e.g. financial inequality, racial diversity, gun ownership, etc.) From that, I can say that in the US, the GINI coefficient had the largest impact on homicide rates and that there’s a specific value that would be optimal for reducing the murder rate (which we can theorize is linked to social dissatisfaction). A somewhat more fuzzy metric is to look back at the Gilded Age, when wealthy tycoons were able to go wild and create things like the Guggenheim Foundation, Hearst Castle, etc. and then look at the various individuals these days who are trying to build spaceships and colonize Mars. This is, as you say, an indication that the wealthy are perhaps a little _too_ wealthy and a signal of something unhealthy. My suspicion is that if you were to figure out when things seemed too far one way and too far the other way, the ideal time periods would also correspond closely with the target that you get from homicide metrics. But, that’s just a theory. ---
**Author:** ![Common\_Tater](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/common_tater/32/13846_2.png) [@Common\_Tater](https://boards.straightdope.com/u/Common_Tater)\ **Post date:** [July 5, 2023, 7:11pm UTC](https://boards.straightdope.com/t/do-capital-gains-screw-the-poor/986644/23 "2023-07-05T19:11:37Z")
> [@Little\_Nemo](#): > > 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. Interestingly enough, income tax was considered unconstitutional for quite some time in American history. It was sold to Americans on a decidedly “Stick It To The Rich!” basis, indeed it would have never been accomplished otherwise. And to be sure the initial rates were quite low - only about 2%, starting at incomes equivalent to about $500,000 annual income. “Special low rates”, indeed. Let’s just go back to that. Seems more than fair to me. Since the federal government has no need to tax, strictly speaking, there’s no real reason for all these byzantine gymnastics anyway. Or at least a 10% flat tax rate and leave everyone alone, etc. ---
**Author:** ![Dewey\_Finn](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dewey_finn/32/4222_2.png) [@Dewey\_Finn](https://boards.straightdope.com/u/Dewey_Finn)\ **Post date:** [July 5, 2023, 7:12pm UTC](https://boards.straightdope.com/t/do-capital-gains-screw-the-poor/986644/24 "2023-07-05T19:12:51Z")
A ten percent flat tax would be really regressive, hitting poor people much heavily than the rich. ---
**Author:** ![Pleonast](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/pleonast/32/1183_2.png) [@Pleonast](https://boards.straightdope.com/u/Pleonast)\ **Post date:** [July 5, 2023, 7:58pm UTC](https://boards.straightdope.com/t/do-capital-gains-screw-the-poor/986644/25 "2023-07-05T19:58:46Z")
A flat tax is only workable if there’s a universal basic income (UBI) that can support the cost of living. For example, UBI of $1000 a week, and then tax all other income (regardless of source) at 30%. There should also be a wealth (regardless of asset) tax of something like 1% per year. Everyone needs to support our society. ---
**Author:** ![Robot\_Arm](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/robot_arm/32/18280_2.png) [@Robot\_Arm](https://boards.straightdope.com/u/Robot_Arm)\ **Post date:** [July 5, 2023, 8:04pm UTC](https://boards.straightdope.com/t/do-capital-gains-screw-the-poor/986644/26 "2023-07-05T20:04:16Z")
> [@Common\_Tater](#): > > Or at least a 10% flat tax rate and leave everyone alone, etc. The complicated part of filing taxes, and where much unfairness lies, is in figuring out how much taxable income you have during a year. There’s salary, capital gains, farm income, rental income, dividends, mortgage interest deduction, and dozens of other things, I’m sure. Once you have that, calculating how much tax you owe is pretty easy. A flat rate, whether 10% or something else, wouldn’t make taxes any simpler or more fair. ---
**Author:** ![Akaj](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/akaj/32/145_2.png) [@Akaj](https://boards.straightdope.com/u/Akaj)\ **Post date:** [July 5, 2023, 8:50pm UTC](https://boards.straightdope.com/t/do-capital-gains-screw-the-poor/986644/27 "2023-07-05T20:50:18Z")
ISTM that the capital gains tax rate may be irrelevant to the OP’s hypothetical (a small investment grows to billions in a retirement account). If the account is a Roth IRA, the investor paid taxes on the income before it was invested, and the earnings will be tax-free no matter how large they grow. But count me among those who believe having a separate, lower tax rate for capital gains is highly regressive and increases wealth disparity. ([I even started a thread on the topic](https://boards.straightdope.com/t/how-can-the-us-justify-a-20-long-term-capital-gains-tax-rate/825950) a few years back.) If the OP’s billionaire buddy had their bitcoin investment in a conventional IRA, and thus had to pay taxes on it when it was withdrawn, there’s no earthly reason why they should have a lower tax rate on those billions than I pay on the money I earn. ---
**Author:** ![Exapno\_Mapcase](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/exapno_mapcase/32/1051_2.png) [@Exapno\_Mapcase](https://boards.straightdope.com/u/Exapno_Mapcase)\ **Post date:** [July 5, 2023, 9:27pm UTC](https://boards.straightdope.com/t/do-capital-gains-screw-the-poor/986644/28 "2023-07-05T21:27:12Z")
> [@Pleonast](#): > > 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. Several things are wrong with this argument. They all revolve you conflating emotional reality with reality. The super-wealthy of yore were not billionaires just because the world was not as wealthy and 100 years of inflation hadn’t happened. They were staggeringly rich nevertheless. What they did is very much like what Gates, Bezos, Brin, Musk, and the others did. They started companies that did what people wanted. They sold stock in those companies. Other people wanted a piece and they bought the stock for higher amounts. The founders kept much of the stock and therefore control. The value of that stock increased. Eventually it was worth billions. What were they supposed to do? Lose control in their own companies? You wouldn’t. Nobody would and nobody does. > [@Sage\_Rat](#): > > A somewhat more fuzzy metric is to look back at the Gilded Age, when wealthy tycoons were able to go wild and create things like the Guggenheim Foundation, Hearst Castle, etc. and then look at the various individuals these days who are trying to build spaceships and colonize Mars. This is, as you say, an indication that the wealthy are perhaps a little _too_ wealthy and a signal of something unhealthy. A Foundation and a Castle? Mixed signals. Aren’t those opposites? Anyway, yesterday’s millionaires spent huge amounts on giant houses, yachts, horse racing stables, wine cellars, fine art, travel around the world and everything else that money could buy. Today’s billionaires give tens of billions to foundations, charities, colleges, and worthy causes. I can’t prove it, but from my reading of the Gilded Age and the Robber Barons, a far larger percentage of wealth is given away by today’s billionaires than ever before, despite a few names that are remembered. Should today’s level of inequality exist? Absolutely not. There was a period between 1900 and 2000 in which inequality was much lower, probably because the Depression made super-wealth both infeasible and unpatriotic and banks stopped lending money. Then Milton Friedman came along in 1972 and said that the only thing any business should care about is its stock price. Workers, the community, the environment, the social fabric, the future, were all evils that distracted from the One True God. ---
**Author:** ![Sage\_Rat](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/sage_rat/32/399_2.png) [@Sage\_Rat](https://boards.straightdope.com/u/Sage_Rat)\ **Post date:** [July 5, 2023, 9:51pm UTC](https://boards.straightdope.com/t/do-capital-gains-screw-the-poor/986644/29 "2023-07-05T21:51:43Z")
> [@Exapno\_Mapcase](#): > > I can’t prove it, but from my reading of the Gilded Age and the Robber Barons, a far larger percentage of wealth is given away by today’s billionaires than ever before, despite a few names that are remembered. Perhaps I’m misunderstanding but you seem to be saying, “Charity is good. Wealthy people equals more charity. Therefore, wealthy people are good.” From everything that I’ve read, the average quality of charity is at about the same level as medicine was in the 1400s. There was a wide belief in its goodness, but that wasn’t indicative of its actual goodness. There are people performing scientific experiments to determine which practices are actually having the intended effect but - like 1400s medicine - so far most things tested are either not better than a placebo or are contraindicated. But, even if we did assume that modern charity was good, I’d suggest that a better metric is the smallness of the number of people needing charity, not the greatness of the funds going towards charity. ---
**Author:** ![Pleonast](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/pleonast/32/1183_2.png) [@Pleonast](https://boards.straightdope.com/u/Pleonast)\ **Post date:** [July 5, 2023, 10:00pm UTC](https://boards.straightdope.com/t/do-capital-gains-screw-the-poor/986644/30 "2023-07-05T22:00:07Z")
> [@Exapno\_Mapcase](#): > > > [@Pleonast](#): > > > > 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. > > Several things are wrong with this argument. They all revolve you conflating emotional reality with reality. The super-wealthy of yore were not billionaires just because the world was not as wealthy and 100 years of inflation hadn’t happened. They were staggeringly rich nevertheless. > > What they did is very much like what Gates, Bezos, Brin, Musk, and the others did. They started companies that did what people wanted. They sold stock in those companies. Other people wanted a piece and they bought the stock for higher amounts. The founders kept much of the stock and therefore control. The value of that stock increased. Eventually it was worth billions. What were they supposed to do? Lose control in their own companies? You wouldn’t. Nobody would and nobody does. I’m not seeing any connection between my post and your reply to me. I was not talking about about a century ago, but the present day. A moral person, who happens to become a billionaire, will relieve themselves of that burden. ---
**Author:** ![Exapno\_Mapcase](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/exapno_mapcase/32/1051_2.png) [@Exapno\_Mapcase](https://boards.straightdope.com/u/Exapno_Mapcase)\ **Post date:** [July 5, 2023, 10:02pm UTC](https://boards.straightdope.com/t/do-capital-gains-screw-the-poor/986644/31 "2023-07-05T22:02:37Z")
What did you think the Guggenheim Foundation was? To build a mansion on? It’s charity. You cited it as what appeared to be a good thing that moderns don’t do. That’s just wrong. Perhaps I’m misunderstanding you, though. ---
**Author:** ![Sage\_Rat](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/sage_rat/32/399_2.png) [@Sage\_Rat](https://boards.straightdope.com/u/Sage_Rat)\ **Post date:** [July 5, 2023, 10:13pm UTC](https://boards.straightdope.com/t/do-capital-gains-screw-the-poor/986644/32 "2023-07-05T22:13:27Z")
> [@Exapno\_Mapcase](#): > > You cited it as what appeared to be a good thing that moderns don’t do. That’s just wrong. Perhaps I’m misunderstanding you, though. I cited it as an example of single individuals using their personal money to create things that are generally more in the territory of government projects. ---
**Author:** ![msmith537](https://avatars.discourse-cdn.com/v4/letter/m/d9b06d/32.png) [@msmith537](https://boards.straightdope.com/u/msmith537)\ **Post date:** [July 5, 2023, 10:28pm UTC](https://boards.straightdope.com/t/do-capital-gains-screw-the-poor/986644/33 "2023-07-05T22:28:21Z")
> [@Pleonast](#): > > A moral person, who happens to become a billionaire, will relieve themselves of that burden. Unless they inherit it, no billionaire just “happens to become a billionaire”. They do so because they created a successful company that grew to be worth billions. That is no small feat. Whatever you think of people like Bill Gates, Jeff Bezos, Mark Zuckerberg, or Elon Musk, they weren’t born running global corporations. You may argue laws should limit what billionaires can buy or sell or set limits on how companies conduct business. But a person is not inherently immoral because the created as successful company. ---
**Author:** ![Pleonast](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/pleonast/32/1183_2.png) [@Pleonast](https://boards.straightdope.com/u/Pleonast)\ **Post date:** [July 5, 2023, 11:46pm UTC](https://boards.straightdope.com/t/do-capital-gains-screw-the-poor/986644/34 "2023-07-05T23:46:22Z")
> [@msmith537](#): > > You may argue laws should limit what billionaires can buy or sell or set limits on how companies conduct business. But a person is not inherently immoral because the[y] created as successful company. (Fixed presumed typos.) I’m not arguing laws, but morals. I agree that creating a successful company is not immoral. I am asserting that possessing extreme wealth (which I am calling a billion (that is, a thousand million, present-day, U.S.) dollars) is immoral, regardless of how it was obtained. ---
**Author:** ![octopus](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/octopus/32/3716_2.png) [@octopus](https://boards.straightdope.com/u/octopus)\ **Post date:** [July 6, 2023, 12:43am UTC](https://boards.straightdope.com/t/do-capital-gains-screw-the-poor/986644/35 "2023-07-06T00:43:00Z")
Capital gains don’t screw the poor. Investing in companies or other assets that grow in value over time actually could help the poor in the sense that a growing economy means that there might actually be more positive externalities that help all. I’m poor relative to Bill Gates, yet one could argue that Microsoft’s ability to product let’s say Excel and sell it for a reasonable price helps me more than the fact that Bill Gates made some billions theoretically hurts me. Wealth isn’t really constrained. So, incentivizing the production of useful goods is vastly more important to me than some notion of financial equality. ---
**Author:** ![Dr.Strangelove](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dr.strangelove/32/6613_2.png) [@Dr.Strangelove](https://boards.straightdope.com/u/Dr.Strangelove)\ **Post date:** [July 6, 2023, 1:13am UTC](https://boards.straightdope.com/t/do-capital-gains-screw-the-poor/986644/36 "2023-07-06T01:13:52Z")
> [@Pleonast](#): > > I agree that creating a successful company is not immoral. I am asserting that possessing extreme wealth (which I am calling a billion (that is, a thousand million, present-day, U.S.) dollars) is immoral, regardless of how it was obtained. How can something be moral and immoral at the same time? Suppose some absolute paragon of morality creates a company that builds inexpensive clean energy devices. They are successful and quickly take over the energy sector, since their devices are superior to everything else out there, clean or dirty. The founder retains control and keeps the company private. Nevertheless, the company is _worth_ trillions of dollars. Even if they never sell, the fact that they retain ownership over the company means the person is worth trillions as well. Are the person’s actions moral or immoral? ---
**Author:** ![Northern\_Piper](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/northern_piper/32/5304_2.png) [@Northern\_Piper](https://boards.straightdope.com/u/Northern_Piper)\ **Post date:** [July 6, 2023, 1:16am UTC](https://boards.straightdope.com/t/do-capital-gains-screw-the-poor/986644/37 "2023-07-06T01:16:32Z")
> [@snowthx](#): > > I do have investments for retirement that earn Capital Gains, and I pay the required taxes on such every year Sidebar please: in the States do you pay taxes on your capital gains every year? In Canada, it’s only when the asset is sold and the capital gain is realised. ---
**Author:** ![Dr.Strangelove](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dr.strangelove/32/6613_2.png) [@Dr.Strangelove](https://boards.straightdope.com/u/Dr.Strangelove)\ **Post date:** [July 6, 2023, 1:22am UTC](https://boards.straightdope.com/t/do-capital-gains-screw-the-poor/986644/38 "2023-07-06T01:22:40Z")
It’s the same in the US (though there are some quicks related to stock options and other instruments). You do have to pay taxes on dividends. The US has long-term and short-term capital gains rates. Short-term is taxed the same as income. Long-term has to be held for a year. ---
**Author:** ![Common\_Tater](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/common_tater/32/13846_2.png) [@Common\_Tater](https://boards.straightdope.com/u/Common_Tater)\ **Post date:** [July 6, 2023, 1:36am UTC](https://boards.straightdope.com/t/do-capital-gains-screw-the-poor/986644/39 "2023-07-06T01:36:26Z")
_I am asserting that possessing extreme wealth . . . is immoral_ Does it necessarily follow that those who refuse to work are immoral too? Is there a “sweet spot” where everything is groovy? As I recall even the Soviets weren’t foolish enough to let people remain idle. They would find you a job, at say, Glorious Widget Factory #24. and it was not optional. ---
**Author:** ![Little\_Nemo](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/little_nemo/32/3120_2.png) [@Little\_Nemo](https://boards.straightdope.com/u/Little_Nemo)\ **Post date:** [July 6, 2023, 1:38am UTC](https://boards.straightdope.com/t/do-capital-gains-screw-the-poor/986644/40 "2023-07-06T01:38:25Z")
> [@Common\_Tater](#): > > Interestingly enough, income tax was considered unconstitutional for quite some time in American history. It was sold to Americans on a decidedly “Stick It To The Rich!” basis, indeed it would have never been accomplished otherwise. No, that’s not accurate. Income tax was introduced in 1861. It was sold to Americans as a means of funding the war. Rich people want to sell the narrative that they are under attack so they rewrite history. The truth, as I’ve noted in this thread, is that rich people pay a lower percentage of taxation then poor people or middle class people. As for the constitutionality issue, that was resolved with the enactment of the Sixteenth Amendment in 1913. Anybody arguing that income tax is unconstitutional today is wrong. [Previous page](https://boards.straightdope.com/t/do-capital-gains-screw-the-poor/986644.md?page=1) [Next page](https://boards.straightdope.com/t/do-capital-gains-screw-the-poor/986644.md?page=3)