# 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:** 6
**Author:** ![Hypno-Toad](https://avatars.discourse-cdn.com/v4/letter/h/b2d939/32.png) [@Hypno-Toad](https://boards.straightdope.com/u/Hypno-Toad)\ **Post date:** [July 7, 2023, 5:02pm UTC](https://boards.straightdope.com/t/do-capital-gains-screw-the-poor/986644/101 "2023-07-07T17:02:16Z")
So far, the closest answer I’ve gotten to the OP is that, by getting increased value on my investments, I am profiteering from an immoral system. And that is a valid opinion, but still just an opinion. I don’t mind all the debate on the morality of great wealth or the inherent responsibilities billionaires. Good points were made all around. But I still haven’t heard **how** an increase in the value of my investments harms the poor. ---
**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 7, 2023, 5:14pm UTC](https://boards.straightdope.com/t/do-capital-gains-screw-the-poor/986644/102 "2023-07-07T17:14:30Z")
> [@msmith537](#): > > Really the error in thinking is that somehow the existence of rich people screws poor people. Poor people would still be poor if companies like Microsoft didn’t exist. There would just be more of them. The existence of rich people isn’t a problem. The problem is how big a percentage of the world’s wealth is concentrated in the hands of a small number of rich people. That’s not a healthy economy. ---
**Author:** ![Great\_Antibob](https://avatars.discourse-cdn.com/v4/letter/g/e47c2d/32.png) [@Great\_Antibob](https://boards.straightdope.com/u/Great_Antibob)\ **Post date:** [July 7, 2023, 5:14pm UTC](https://boards.straightdope.com/t/do-capital-gains-screw-the-poor/986644/103 "2023-07-07T17:14:32Z")
To which question? Investments that are more realistic as in investing in various companies? There’s opportunity cost all around on that, as the extended discussion here has provided. The somewhat contrived example of bitcoins? Still lots of opportunity cost there - the rather large amounts of electricity to keep the blockchain going don’t exist in a vacuum and the investments in equipment (all those GPU cycles and rackspace) and power (rivaling that of small nations and often produced in countries with lax environmental regulation on how it’s produced and affects the local population) to keep it going could have gone to something else and definitely have impacts, environmental and otherwise, on everybody, not just the poor. We’re generally bad at costing externalities, and this is a good example of that. Other people have been and will continue to be affected by cryptocurrency. Just because you aren’t personally dumping a bunch of noxious chemicals from the power plants involved doesn’t necessarily mean you are totally in the clear. Or at least there’s a reasonable argument to be had there about the moral implications of that investment. ---
**Author:** ![LSLGuy](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/lslguy/32/5813_2.png) [@LSLGuy](https://boards.straightdope.com/u/LSLGuy)\ **Post date:** [July 7, 2023, 5:18pm UTC](https://boards.straightdope.com/t/do-capital-gains-screw-the-poor/986644/104 "2023-07-07T17:18:41Z")
Yeah. Bitcoin is a terrible example of an “investment” because it’s simply a trading mania no different from Beanie Babies. 100% of the price of bitcoin is smoke and mirrors. The OP also keeps using the terms “value” and “price” as if they mean the same thing. They don’t. I think @Little_Nemo nailed it a couple posts ago. A more balanced wealth distribution would make a much larger slice of pie for many many people. And they would probably make the pie even larger by doing so. The current situation represents “harm” to the poor when compared to better possible situations. ---
**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 7, 2023, 6:07pm UTC](https://boards.straightdope.com/t/do-capital-gains-screw-the-poor/986644/105 "2023-07-07T18:07:40Z")
> [@bump](#): > > I guess where I struggle is that people always say billionaires have this greater responsibility… to _something_ because of their great wealth. But nobody ever defines what that responsibility is, who it’s to, what is expected, and so forth. I don’t think of it so much as a responsibility as a justification. We live in societies and make up the rules for how we live together. Money is part of those rules; there wouldn’t be any point in being a billionaire if you were the only person around. So the question is how does society as a whole benefit from the presence of billionaires among us? Would we be better off without billionaires? It would be relatively easy to form such a society; just have some rules setting an upper limit on wealth (say ten million dollars) and confiscate everything above that amount. Some might argue this is a good system. Ten million dollars is more than most people ever have and I doubt anyone can argue that it’s too small an amount to live on. And all that confiscated wealth could be used to do some good for society (although there would be plenty of arguments over what that good should be). Personally, I would oppose such a program however. I feel there shouldn’t be an upper limit on potential wealth. I feel that a person should potentially be able to make as much money as they can. But I also don’t believe that making money is a justification all by itself. Just because money can be made doesn’t mean it necessarily should be made. There are people who seem to disagree and feel that anything a billionaire does to make money must be okay and anything he does with that money must be okay. These people seem to attribute the same status to billionaires that some people a thousand years ago attributed to kings; that they are above all of us and answerable to no one accept themselves. (Some of these people might deny that this is their belief but it’s the conclusion that derives from their stated beliefs and actions.) I feel that society has the right to put rules on billionaires. Going beyond that, I feel society should put rules on billionaires. Society should have rules saying how you can make money, how much money you can make, how much money you can keep, and what you can do with that money. Within that broad outline, I’m willing to discuss the details. ---
**Author:** ![snowthx](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/snowthx/32/10660_2.png) [@snowthx](https://boards.straightdope.com/u/snowthx)\ **Post date:** [July 7, 2023, 6:29pm UTC](https://boards.straightdope.com/t/do-capital-gains-screw-the-poor/986644/106 "2023-07-07T18:29:38Z")
> [@LSLGuy](#): > > I think @Little_Nemo nailed it a couple posts ago. A more balanced wealth distribution would make a much larger slice of pie for many many people. And they would probably make the pie even larger by doing so. I don’t disagree with this at all. But above we were sort-of aligning to the idea that this is not a zero-sum game - someone earning a lot of money is not necessarily taking money from someone else, right? I think what we need is evening up the foundations (the taxation process) more so everyone has an equal chance at getting a slice of the pie, not that someone doing well is depriving others of a fair share of pie. ---
**Author:** ![Hypno-Toad](https://avatars.discourse-cdn.com/v4/letter/h/b2d939/32.png) [@Hypno-Toad](https://boards.straightdope.com/u/Hypno-Toad)\ **Post date:** [July 7, 2023, 6:35pm UTC](https://boards.straightdope.com/t/do-capital-gains-screw-the-poor/986644/107 "2023-07-07T18:35:49Z")
To quote Leela: “I’m a millionaire! Suddenly, I have an opinion on the capital gains tax!” ---
**Author:** ![bump](https://avatars.discourse-cdn.com/v4/letter/b/7c8e57/32.png) [@bump](https://boards.straightdope.com/u/bump)\ **Post date:** [July 7, 2023, 7:11pm UTC](https://boards.straightdope.com/t/do-capital-gains-screw-the-poor/986644/108 "2023-07-07T19:11:46Z")
That’s pretty much where I am as well. I just balk at the idea that billionaires are personally evil, or that they necessarily made their wealth unethically, or anything along those lines. That sort of thinking is sour grapes and resentment. At best, you can say that they’re not as socially conscious as you like. ---
**Author:** ![beowulff](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/beowulff/32/542_2.png) [@beowulff](https://boards.straightdope.com/u/beowulff)\ **Post date:** [July 7, 2023, 9:51pm UTC](https://boards.straightdope.com/t/do-capital-gains-screw-the-poor/986644/109 "2023-07-07T21:51:31Z")
So, if the supposition here is that becoming a billionaire due to the value of your stock holdings increasing somehow screws the poor, is it then true that if the market collapses and you lose $500,000,000, that helps the poor? ---
**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 7, 2023, 9:52pm UTC](https://boards.straightdope.com/t/do-capital-gains-screw-the-poor/986644/110 "2023-07-07T21:52:32Z")
Now you’re trying to apply logic. Where does that belong in an internet discussion? ---
**Author:** ![beowulff](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/beowulff/32/542_2.png) [@beowulff](https://boards.straightdope.com/u/beowulff)\ **Post date:** [July 7, 2023, 9:57pm UTC](https://boards.straightdope.com/t/do-capital-gains-screw-the-poor/986644/111 "2023-07-07T21:57:39Z")
I forget sometimes… ---
**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 7, 2023, 10:28pm UTC](https://boards.straightdope.com/t/do-capital-gains-screw-the-poor/986644/112 "2023-07-07T22:28:24Z")
> [@beowulff](#): > > So, if the supposition here is that becoming a billionaire due to the value of your stock holdings increasing somehow screws the poor, is it then true that if the market collapses and you lose $500,000,000, that helps the poor? No, because the “evil” (assuming such exists) does not arise because your stocks rose in value. Or fell in value. The “evil” comes from the fact that an economic system exists in which you, as an individual, own hundreds of millions of dollars worth of stocks. ---
**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 7, 2023, 11:47pm UTC](https://boards.straightdope.com/t/do-capital-gains-screw-the-poor/986644/113 "2023-07-07T23:47:17Z")
That economic system has existed since the invention of limited liability stock companies, usually given as the Dutch East India Company in 1611. Instead of individuals taking out loans and repaying them with interest, a stock company allowed many people to pool their money and own a proportional share of the endeavor’s profits. It was limited liability because you could get a zero return but nobody could go after the rest of your wealth. Stock companies made England into a world power and created America through its colonies. Eco 101, sure. But stock companies are virtually synonymous with capitalism. You can complain about the morality of capitalism. Almost everybody does, including lots of capitalists. Marxist critiques of capitalism are very persuasive. They were the big thing when I was in college. Looking back, I realize how close they are to modern internet debates, when one ~~loud~~ charismatic person starts ranting about something they find evil and want the world to change by tomorrow. Change to what? Change how and when? Change by imposition without everybody agreeing? Lots of questions with no good answers. Wealth is a fundamental part of capitalism. The whole modern, electronic, computerized, interconnected, device-driven, cheap products, year-round food, global supply-lined world that’s lifted billions from abject poverty and other billions into the middle-class is based on the amazing amount of wealth created by capitalism. The way that stuff is calculated has changed over time, so comparisons are difficult, but to a close approximation the GDP of the U.S. has increased _1000 times_ since 1900. (Some of that is 120 years of inflation but a very small part.) The reason we can have billionaires is that our wealth is now measured by trillions. The world GDP is $100T. An individual who has $100B towers over you and me but is insignificant from a global perspective. Does capitalism intrinsically have to be run as cutthroat competition? Not at all. As I sad in post #28, Milton Friedman is to blame. Similar thinking is to blame for our government not taxing sufficiently to fund a Scandinavian social democratic welfare state. The logic is similar. Taxation and regulation cuts profits that could otherwise attract stockholders. Corporations have no other duties than to squeeze every penny out of society. None. This is obviously absurd and outrageous. This can be changed. Actually is, I think, if by slow inches. Nevertheless, changing the driving force of capitalism would not remove billionaires from the process they are mere by-products of. America’s disastrous healthcare system is because of government indifference, profiteering CEOs, the force-fed horror of socialized medicine, and a poor and aging population, not the mere presence of billionaires. A government with a spine and a population with a mind could revamp the system quickly and still leave plenty of money sloshing around to fund new medications and pour money into pockets. ---
**Author:** ![msmith537](https://avatars.discourse-cdn.com/v4/letter/m/d9b06d/32.png) [@msmith537](https://boards.straightdope.com/u/msmith537)\ **Post date:** [July 8, 2023, 11:31am UTC](https://boards.straightdope.com/t/do-capital-gains-screw-the-poor/986644/114 "2023-07-08T11:31:22Z")
> [@Little\_Nemo](#): > > So the question is how does society as a whole benefit from the presence of billionaires among us? Would we be better off without billionaires? It would be relatively easy to form such a society; just have some rules setting an upper limit on wealth (say ten million dollars) and confiscate everything above that amount. > > Some might argue this is a good system. Ten million dollars is more than most people ever have and I doubt anyone can argue that it’s too small an amount to live on. And all that confiscated wealth could be used to do some good for society (although there would be plenty of arguments over what that good should be). > > Personally, I would oppose such a program however. I feel there shouldn’t be an upper limit on potential wealth. I feel that a person should potentially be able to make as much money as they can. A capitalist society benefits from having billionaires because they have typically created many more billions in wealth with the products, services, and jobs provided by the companies they created. Where there is less of a societal benefit is when a nations billionaires are mostly oligarchs who have accumulated their wealth through ownership of monopolies enabled by connections and favoritism by corrupt governments. Those structures are essentially kleptocracies more concerned with hoarding and controlling capital than reinvesting it into the economy where it will benefit society. Liberals always cry about how unfair it is that some people are so much wealthier than others. But they generally don’t consider how wealth is generated in the first place. If you put a cap on how much someone can earn, you also put a cap on how much they can create. ---
**Author:** ![msmith537](https://avatars.discourse-cdn.com/v4/letter/m/d9b06d/32.png) [@msmith537](https://boards.straightdope.com/u/msmith537)\ **Post date:** [July 8, 2023, 11:52am UTC](https://boards.straightdope.com/t/do-capital-gains-screw-the-poor/986644/115 "2023-07-08T11:52:47Z")
> [@Hypno-Toad](#): > > 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. First of all, it helps to have a basic understanding of finance and economics. When you put money in your IRA where you will typically acquire shares of some mutual fund (a collection of stocks), what you are really doing is buying tiny fractions of ownership in various corporations. Presumably with the assumption those corporations will grow and increase in value. Some time ago, each of those companies held an IPO (Initial Public Offering) where they essentially sold off portions of their company in the form of stock in exchange for cash. The company kept enough shares to maintain ownership and control of the company and used the cash for stuff like paying employees, expanding their business, and probably bonuses and private jets for the CEO and senior executives. This is generally a good thing for the employees, as it helps the company grow and often provides opportunities to increase their own wealth. Where it gets more complicated is that as a public company, the firm is under a lot more pressure to perform for their owners, which is often institutional shareholders (ie Wall Street investment banks and hedge funds). And the interests of those Wall Street investors typically favor short-term profits over long term growth. The tax structure for capital gains tends to favor the wealth as well. Most capital gains are concentrated in those with higher income, Capital gains are also taxed at a lower rate than general income. So while not specifically “screwing” the poor, it is a structure that does favor the wealthy. ---
**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 8, 2023, 12:38pm UTC](https://boards.straightdope.com/t/do-capital-gains-screw-the-poor/986644/116 "2023-07-08T12:38:03Z")
> [@Exapno\_Mapcase](#): > > Wealth is a fundamental part of capitalism. The whole modern, electronic, computerized, interconnected, device-driven, cheap products, year-round food, global supply-lined world that’s lifted billions from abject poverty and other billions into the middle-class is based on the amazing amount of wealth created by capitalism. As I have said, I have no problem with capitalism. It works. And, as you noted, it can produce great benefits for society. But, as you also noted, capitalism isn’t inherently perfect and people who treat it as if it is are wrong. It’s foolish to simply let capitalism go wherever it wants and do whatever it wants and blithely assume the results will be great. Capitalism needs a frim hand on the rudder. ---
**Author:** ![Cheesesteak](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/cheesesteak/32/3694_2.png) [@Cheesesteak](https://boards.straightdope.com/u/Cheesesteak)\ **Post date:** [July 8, 2023, 12:40pm UTC](https://boards.straightdope.com/t/do-capital-gains-screw-the-poor/986644/117 "2023-07-08T12:40:09Z")
> [@beowulff](#): > > is it then true that if the market collapses and you lose $500,000,000, that helps the poor? Great question, the answer is likely no. The issue is not the existence of $500M of wealth, it’s (at least one part of the issue is) that when that wealth is generated by economic activity, it goes almost exclusively to ownership, that’s what screws the poor. That isn’t fixed by a market crash. If this loss of stock value is caused by changes that direct more earnings towards the workforce, then it might help the poor. ---
**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 8, 2023, 12:43pm UTC](https://boards.straightdope.com/t/do-capital-gains-screw-the-poor/986644/118 "2023-07-08T12:43:14Z")
> [@msmith537](#): > > A capitalist society benefits from having billionaires because they have typically created many more billions in wealth with the products, services, and jobs provided by the companies they created. No, that’s not really what a typical billionaire does. It’s only the exceptional billionaires who created the wealth they own. Most billionaires are the descendants of those exceptional creators. Their goal is not to create new wealth; it’s to make sure that existing wealth stays where it is. I’ve observed in previous threads that progress is not the result of people having wealth. Progress is the result of people seeking wealth. ---
**Author:** ![LSLGuy](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/lslguy/32/5813_2.png) [@LSLGuy](https://boards.straightdope.com/u/LSLGuy)\ **Post date:** [July 8, 2023, 2:20pm UTC](https://boards.straightdope.com/t/do-capital-gains-screw-the-poor/986644/119 "2023-07-08T14:20:01Z")
> [@msmith537](#): > > A capitalist society benefits from having billionaires because they have typically created many more billions in wealth with the products, services, and jobs provided by the companies they created. > … > But they generally don’t consider how wealth is generated in the first place. If you put a cap on how much someone can earn, you also put a cap on how much they can create. Agree completely about your oligarch comments that I snipped from the middle of the quote above. “Crony capitalism” is mostly about cronyism, not capitalism. And is an unmitigated evil. As to the part I quote I’ll argue a bit … The fallacy in the thinking you so ably explain comes in when we we simply _assume_ that initial ownership of a good idea or a small company _must_ continue as sole ownership as the company changes from 1 person to 10 to 10,000. The founder of what’s now a megacorp does not solely create the value it creates this month. So why should everyone who works their receive only wages while the founder receives 100% of the dividends and stock price appreciation? And often a high wage to boot? A system where as a company grows it must transfer ownership shares to _all_ the people who are making it grow, would produce just as much total growth, economic value, etc. But would distribute it far more accurately according to who is actually generating that later-stage growth, not just to who has captured the right to horde it all. Viewed from this POV (or through this lens if you prefer) standard Western law-abiding honest capitalism “smells” a lot closer to crony capitalism, where a shadowy force has arranged to obtain and retain outsized benefits for themselves versus their actual contribution to those ongoing gains. Here’s another take on the same idea … Patents serve to provide a monopoly on successful inventions to encourage innovation. But they are time-limited to prevent perpetual rent-seeking and to allow the benefits of invention to flow to other businesses, encouraging greater economic growth for all. Imagine founding ownership had a similar time limit as patents do. The founder would have exclusive rights to the fruits of their company. For awhile. After that time they must divest some significant portion of their ownership and dividend rights to their current and former employees. And/or to a sovereign wealth fund for the benefit of all society. And they must continue doing so going forward until at some future date (100 years?) there is no more founder stockholding at all. Innovation is still rewarded. Just not as much to one (or a few) people in perpetuity. Growth is still rewarded. But the rewards flow to everyone creating the growth. Not just to one or a few. Something to think about. ---
**Author:** ![FlikTheBlue](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/fliktheblue/32/10972_2.png) [@FlikTheBlue](https://boards.straightdope.com/u/FlikTheBlue)\ **Post date:** [July 8, 2023, 2:20pm UTC](https://boards.straightdope.com/t/do-capital-gains-screw-the-poor/986644/120 "2023-07-08T14:20:24Z")
> [@Hypno-Toad](#): > > But I still haven’t heard **how** an increase in the value of my investments harms the poor. The most direct answer is that money could have gone to the employees. Let’s say your investments include McDonalds, Disney, and Walmart. The money you earned as capital gains could have instead gone to paying a higher salary to the person flipping burgers, stocking the shelves, or wearing a Donald Duck outfit in 100 degree heat at Disneyworld. Had those people been getting paid better, your investment would not have increased in value as much, because the company would have been less profitable due to higher expenses for employee salaries. [Previous page](https://boards.straightdope.com/t/do-capital-gains-screw-the-poor/986644.md?page=5) [Next page](https://boards.straightdope.com/t/do-capital-gains-screw-the-poor/986644.md?page=7)