Profits are a tax on labor

[LinusK]

@Mijin

OK, so here are some of the problems with that position:

1. You didn’t answer the question about whether the farmer makes unearned income if his crop is just more popular right now. I think if you did, you’d see the following problem: who determines what the “right” price of the crop is?
   Are potatoes overpriced right now? Are potato farmers making unearned income?
   Coffee goes for a lot more than potatoes (by weight), because people really love coffee. Does that mean unearned income for the farmer?

I think you’re mixing two different questions here. One is about the difference between earned and unearned income, and the other is about setting prices. Coffee has a price, potatoes have a price, and labor has a price. Prices of things are set according to supply and demand (among other things), not by how valuable they are, or useful, or necessary. Water, for example, is necessary for life, but very cheap. Diamonds are useless baubles, but very expensive. Saving someone’s life, or dispensing justice might be very important, but aren’t likely to pay as well as (say) being really good at throwing a basketball through a hoop.

There’s nothing inherently just or fair about how prices are set, whether it’s for saving lives or for diamonds.

Nevertheless, money you get for saving someone’s life (if you’re a doctor, or a paramedic) or dispensing justice (if you’re a judge, or a juror) or throwing balls through hoops (if you’re a pro basketball player) is earned income. It’s money you get for doing work.

Money you get for owning a hospital, or a courthouse (if such a thing were possible) or a basketball team is unearned income.

If you’re a potato farmer, the money you get for planting and harvesting potatoes is earned income. If you own a potato farm, the money you get for owning the farm is unearned income. If you’re both the farmer and the farm-owner, it may be hard to tell what’s what, but the principle is the same. If the price of potatoes goes up, presumably the owners of potato farms will have greater than normal profits. Maybe they’ll pass on their profits in the form of higher wages to their workers. Or maybe not. Either way, if the money’s for making potatoes, it’s earned. If it’s for owning a farm, it’s not.

2. In the OP and throughout this thread, you’ve implied something immoral about unearned income. You’ve asked for a “moral justification” for it.

The moral justification for obtaining the value of a thing you make yourself seems pretty self-explanatory: you made it; it wouldn’t exist but for your efforts. If not yours, whose would it be?

The moral justification for obtaining the value of the work of others, however, is not obvious.

[QuickSilver]

@LinusK

The moral justification for obtaining the value of the work of others, however, is not obvious.

…To you.

But no matter how many times you repeat this objection or how many far fetched hypothetical scenarios you propose, it remains reasonably obvious to the majority of people in this thread.

[Human_Action]

@LinusK

The moral justification for obtaining the value of the work of others, however, is not obvious.

So if profits are immoral, what of losses?

[QuickSilver]

@LinusK

If you’re a potato farmer, the money you get for planting and harvesting potatoes is earned income. If you own a potato farm, the money you get for owning the farm is unearned income. If you’re both the farmer and the farm-owner, it may be hard to tell what’s what, but the principle is the same. If the price of potatoes goes up, presumably the owners of potato farms will have greater than normal profits. Maybe they’ll pass on their profits in the form of higher wages to their workers. Or maybe not. Either way, if the money’s for making potatoes, it’s earned. If it’s for owning a farm, it’s not.

Say it’s a really big farm…

How many rows must a farmer hoe
Before he’s earned his dough?

[SlackerInc]

@QuickSilver

Many things are arbitrary. Morals are arbitrary. Political systems are arbitrary. Life is arbitrary in many ways. But we, as humans, have a fundamental need to make sense of the world we live in and to control the things we can control to avoid the chaos that’s always knocking at the door.

Right. Which means there’s no fundamental reason the rules can’t be changed, at the very least, to something like “to become rich you have to at least DO something to get your money, not just sit back and collect rent because you ‘own’ something that you inherited and someone else manages”. Now, I get that most of the people debating in this thread do not want to change the rules in that way. And as long as that is also true of a majority of active participants in our democracy, they will *not *be changed in that way.

But what I have been seeing at least implied in a lot of these posts is an idea that there is something like a “natural law” of ownership of property. A kind of harrumphing that to change the law in the way I am advocating would go against the natural order of the universe (which puts me to mind of what many people likely first thought about letting women vote, or letting wealthy industrialists born outside the peerage become part of high society). And that is the notion I am trying to puncture by posing thought experiments about owning three-dimensional segments of the atmosphere (and perhaps renting it out to people who want to fly planes through it.)

@pancakes3

So we’ve gone from armchair economist to armchair philosopher?

Indeed. Just like most people here. Isn’t that what this board is all about?

@pancakes3

People own land because as a society we’ve agreed that people can own land.

Exactly right. And if we as a society decide otherwise, that will change. IOW **LinusK **was right: a lot of this stuff is really just a privilege granted to us by the government. The government says we own X, so we can sell it or rent it out and the government will intervene with force if someone tries to take it or use it without paying us. (And as I hinted at, if you were to trace back the ownership of a piece of land far enough, it was the government who at some point originally codified its being owned by a certain person without their having to reside there and physically guard it.)

@pancakes3

If you want to say that ownership of land, and the right to live somewhere isn’t inherent, and should be disregarded, then you’ve not just moved the goal posts. You’ve completely changed the game and that is either woefully disingenuous or woefully ignorant.

I don’t know where you get the “right to live somewhere” part. I am particularly talking about absentee ownership of land. (Like that percentage of an apartment building in Amherst that I’ve never seen in person.) The right to own the place you live and personally maintain is still a social convention in some sense, but as you note with the mention of animals, it is much more ancient and much less arbitrary and abstract. Change that around a bit and imagine an animal asserting ownership over land they have never set foot on. The idea is patently absurd on its face.

As for arguing that I’m trying to go beyond moving the goal posts to changing the game…well, I think you are overly rigid in your thinking. Look at it this way: there are people still alive who can remember Calvin Coolidge being president. How different is society’s organisation now than it was then? I don’t think a shift like I’m proposing, although radical, is any more radical a change than what we have seen in the last eighty years concerning the power of the federal government to regulate commerce and intervene in the economy, and in the diminishment of the hegemony of the white heterosexual male.

[Mijin]

@LinusK

One is about the difference between earned and unearned income, and the other is about setting prices. Coffee has a price, potatoes have a price, and labor has a price. Prices of things are set according to supply and demand (among other things), not by how valuable they are, or useful, or necessary. Water, for example, is necessary for life, but very cheap.

You’ve stated that if the farmer’s crop goes up in price because other farmers have a poor harvest, then he has made “unearned income”.
However you’re now saying (or at least implying) that if the crop goes up in price because of increased demand, that’s ok.

The problem is those things are impossible to separate: the demand for my crop is a function of how difficult it is to grow it.

If we were to follow your philosophy through, we’d have to conclude that the farmer both does and does not make unearned income.

Nevertheless, money you get for saving someone’s life (if you’re a doctor, or a paramedic) or dispensing justice (if you’re a judge, or a juror) or throwing balls through hoops (if you’re a pro basketball player) is earned income. It’s money you get for doing work.

Does it help then if we just call making investment decisions work? I mean, if you’re happy to say that what we call work is arbitrary and doesn’t involve necessarily getting dirt under one’s fingernails, why don’t investments count?

And note this decision doesn’t just get exercised when you transfer wealth from one form to another. Every month I own a factory I have to decide to keep my capital there and not sell up and move it somewhere else.

The moral justification for obtaining the value of a thing you make yourself seems pretty self-explanatory: you made it; it wouldn’t exist but for your efforts.

And exactly the same thing is true of investments, as has been explained to you many times.

[Mijin]

@SlackerInc

Let me pose this question: on what basis do people own land? Sure, they bought it from someone or inherited it from someone. But if you trace that back, how did someone originally get to own it and then sell it and make money from doing so?

Someone originally just claimed it, sure.
And we can talk a lot about this issue, and probably have on the Dope.

But I think it’s very different to the OP, which is questioning the morality of ownership itself. Imagine everyone is just allocated the same amount of (fertile) land at birth. You’d still have factories, you’d still have investments, and, alas, you’d still have inequality.
Heck, if they were allowed to, many people would sell some or all of their allotment, and very quickly you’d end up with something like the status quo.

[SlackerInc]

How about if no one is allowed to own land, but can lease it cheaply from the government as long as they personally make productive use of it?

[Mijin]

@SlackerInc

How about if no one is allowed to own land, but can lease it cheaply from the government as long as they personally make productive use of it?

Again, not really related to the OP, but if you’re asking my opinion, I think again this would not work.

First of all, what is “productive use”? Is living somewhere productive?

Secondly, what about when, inevitably, more than one person wishes to use the same portion of land?
Say I have a shack from which I sell fish. But OmniMegaCorp believe this is the only place they can build a harbour, and to them (and the economy) the site is worth $100 million. What happens next?

Now you may say that although the government owns land and leases it out, “certificates of current occupier” or whatever are handed out and these are tradable. I can sell my certificate to OmniMegaCorp.
The problem with this is that of course it would really be the status quo. The certificates are land deeds in all but name. All we’ve added is a new tax in the form of a land lease.

[Mijin]

Oh, and thirdly, constructing buildings take significant investment (and time), and most buildings are not portable.

If I could not be sure whether the land will be mine tomorrow, or whether the government would decide my use is not productive enough, I would not risk such an investment.

The result would be fewer buildings and a smaller economy, depending on how often the government forces turnover of land.

[QuickSilver]

@SlackerInc

Right. Which means there’s no fundamental reason the rules can’t be changed, at the very least, to something like “to become rich you have to at least DO something to get your money, not just sit back and collect rent because you ‘own’ something that you inherited and someone else manages”. Now, I get that most of the people debating in this thread do not want to change the rules in that way. And as long as that is also true of a majority of active participants in our democracy, they will *not *be changed in that way.

But what I have been seeing at least implied in a lot of these posts is an idea that there is something like a “natural law” of ownership of property. A kind of harrumphing that to change the law in the way I am advocating would go against the natural order of the universe (which puts me to mind of what many people likely first thought about letting women vote, or letting wealthy industrialists born outside the peerage become part of high society). And that is the notion I am trying to puncture by posing thought experiments about owning three-dimensional segments of the atmosphere (and perhaps renting it out to people who want to fly planes through it.).

It feels like we’ve been going over the same old ground in this conversation.

I agree that some people may think that there are “natural laws” but the majority here do not. FWIW, I certainly don’t.

The rules of ownership are what they are because most people have agreed on what they should be and they’ve codified them into law and allow the gov’ts to enforce those laws.

Why the laws we have and not the laws you think we should have? Because it’s the least bad solution given the other relatively worse solutions, human nature being what it is.

Can we change these laws? Sure. Society has a way of evolving and laws are only as permanent as the will and whim of society. But you understand this. What I think you’re asking is, “Why can’t everybody just be as socially minded and economically progressive as me? Can’t they see I’m right about this?!”

To this, my response is: organize a group of like minded folks, print some pamphlets, hold a rally, gain support, run for political office, get elected, propose bills, change hearts and minds, rally more votes, pass laws, change society, PROFIT! It’s that easy.

If it makes you feel any better, I might even cast my vote with your lot. As long as there aren’t any required party memberships and meetings. I hate that.

[Bremidon]

@LinusK

Actually, we don’t know that he got the building by saving up his wages. Since the average wage in the US is around $40k, and even a smallish apartment building might run into several millions, that seems like a pretty unlikely option. (Even if he saved half his wages, it’d take a century, or two, to save up enough for an apartment building.)

Leaving aside the rather absurd implication that you need millions to buy an apartment building, you do not need 200 years to save a million bucks. If you can save 5000 a year and get 10% growth (the average growth rate of the stock market over any 10 year period), you’ll have over 1,5 million after 35 years.

If playing the stocks is too risky for you (what are you doing investing in real estate then?), you do not even have to save up first to buy a building. There’s a thing called a bank, and the bank will lend you money. If you have made a good investment, you will make more money than you have to pay the bank for performing this service.

If you do not like banks, you can also use a technique known as “Partners.” Partners are people who will share resources in order to make larger investments than would otherwise be possible.

If you do not have enough friends, then you can try to go with a technique called “Incorporation” and sell shares to raise money.

@LinusK

But what difference does it make? You’re not saying his entitlement to profit depends on how he got the building, are you?

It makes no difference to me. And apparently it makes no difference to you. Good. Then let’s list the ways someone can come by an apartment building.

1. He can build it. No debate where his contribution comes from here.
2. He can buy it. No debate where is contribution comes from here.
3. He can receive it as a present. Questionable contribution only if you dispute the legitimacy of gifts.
4. He can inherit it. Really just a gift from a dead guy. Questionable contribution only if you dispute the legitimacy of inheritance.

I do not question the legitimacy of either gifts or inheritance, so I am perfectly consistent when I say his investment in the building is his contribution.

@LinusK

I’m not. Where have I suggested stealing anything from anybody?

Practically every single one of your posts has implicitely advocated relieving people of property that you feel would be better served if…actually, I have no idea what your solutions are, but judging from history, I’m pretty sure you would start by “giving things to The People.” And that equates to theft.

@LinusK

I have nothing against inheritance. In fact, if I’m the one getting the inheritance, I’m 100% for it. What I’m arguing is that for one person to live off his inheritance, someone else (or some other people) must work more, or consume less, in order to make up for it.

You were, in fact, for inheritance before you were against it.

[Bremidon]

@Mijin

Again, not really related to the OP, but if you’re asking my opinion, I think again this would not work.

First of all, what is “productive use”? Is living somewhere productive?

Secondly, what about when, inevitably, more than one person wishes to use the same portion of land?
Say I have a shack from which I sell fish. But OmniMegaCorp believe this is the only place they can build a harbour, and to them (and the economy) the site is worth $100 million. What happens next?

Now you may say that although the government owns land and leases it out, “certificates of current occupier” or whatever are handed out and these are tradable. I can sell my certificate to OmniMegaCorp.
The problem with this is that of course it would really be the status quo. The certificates are land deeds in all but name. All we’ve added is a new tax in the form of a land lease.

Precisely. Almost all the “Common Goods” ideas run into the same problem: someone has to be in charge. And ultimately, that person becomes the owner in all but name.

[pancakes3]

@SlackerInc

Right. Which means there’s no fundamental reason the rules can’t be changed, at the very least, to something like “to become rich you have to at least DO something to get your money, not just sit back and collect rent because you ‘own’ something that you inherited and someone else manages”.

Someone did do something to earn that land. Then it was passed on down through the generations. The current generation is profiting off excess value that their forefathers generated. If that is something that you feel like is inherently immoral and arbitrary, know that it’s your hangup. Most people do not feel that way. Using and building off things that previous generations have accomplished is the basis of human society.

Now, I get that most of the people debating in this thread do not want to change the rules in that way. And as long as that is also true of a majority of active participants in our democracy, they will *not *be changed in that way.

Well popular opinion or not, what I find objectionable is the logic behind your views, not the popularity of it.

But what I have been seeing at least implied in a lot of these posts is an idea that there is something like a “natural law” of ownership of property. A kind of harrumphing that to change the law in the way I am advocating would go against the natural order of the universe (which puts me to mind of what many people likely first thought about letting women vote, or letting wealthy industrialists born outside the peerage become part of high society). And that is the notion I am trying to puncture by posing thought experiments about owning three-dimensional segments of the atmosphere (and perhaps renting it out to people who want to fly planes through it.)

Not a natural law. A logical law. A law that works and has worked for thousands of years. What you’re proposing isn’t a freeing of mankind like giving women the vote but rather a restriction of people and their ability to a) accumulate wealth beyond what they NEED and b) ability to pass it to future generations.

Exactly right. And if we as a society decide otherwise, that will change. IOW **LinusK **was right: a lot of this stuff is really just a privilege granted to us by the government. The government says we own X, so we can sell it or rent it out and the government will intervene with force if someone tries to take it or use it without paying us. (And as I hinted at, if you were to trace back the ownership of a piece of land far enough, it was the government who at some point originally codified its being owned by a certain person without their having to reside there and physically guard it.)

The government isn’t a separate entity from the people. It’s a representation for the people. The laws passed reflect the values of those people. If you want to call it arbitrary? Fine. But so is the concept of good/evil, gender equality, and rule of law in general. It’s a facile argument.

I don’t know where you get the “right to live somewhere” part. I am particularly talking about absentee ownership of land. (Like that percentage of an apartment building in Amherst that I’ve never seen in person.) The right to own the place you live and personally maintain is still a social convention in some sense, but as you note with the mention of animals, it is much more ancient and much less arbitrary and abstract. Change that around a bit and imagine an animal asserting ownership over land they have never set foot on. The idea is patently absurd on its face.

Your grandfather bought land. He has since passed and so there is an absentee ownership of land. You now hold the deed. It’s your CHOICE to be absentee. What you’re proposing is a “use it or lose it” clause on something that the laws of society has classically defined as yours.

The way you’re profiting from it is waiving your potential to utilize the property and leasing it out to others. The use is the “right to live there”. You have lost the ability to live in that apartment building and others have gained the right to live there. That is the value. That is what you’re being paid for. There is nothing immoral about that.

As for arguing that I’m trying to go beyond moving the goal posts to changing the game…well, I think you are overly rigid in your thinking. Look at it this way: there are people still alive who can remember Calvin Coolidge being president. How different is society’s organisation now than it was then? I don’t think a shift like I’m proposing, although radical, is any more radical a change than what we have seen in the last eighty years concerning the power of the federal government to regulate commerce and intervene in the economy, and in the diminishment of the hegemony of the white heterosexual male.

How different is today’s social organization compared to 2000 years ago when Romans would own city apartments while financed by their country villas that produced wine, oil, and livestock? Or 4000 years ago where Pharaohs and Emperors were profiting off lands they’ve never even heard of much less seen? Making money off something without being present for it is nothing new. Proposing to abolish it is a supremely radical proposition that will alter the economic system in a way that I can’t even begin to enumerate the repercussions.

@SlackerInc

How about if no one is allowed to own land, but can lease it cheaply from the government as long as they personally make productive use of it?

Ok. I’ll try to enumerate what I perceive as the flaws

• If the lease is for 99 years but I die the day after I pen my lease, can it pass to my spouse? Children?
• How much work would it take to deem someone as “personally make productive”?
• Does sitting on the porch and “supervising” count?
• Do they have to actively doing manual labor?
• How many days a year does that person have to work on the property to be considered “active”, minimum?
• Would this extend to other capital goods?
• What if I want to rent a car? Does the owner of the rental company have to ride shotgun with me?
• What if I want to buy the complete works of Shakespeare? Who owns the rights to it?Is it free?
• Who gets the land if I “lose” it by not being active?
• Is there a warning system or am I just booted?
• Is there anything that I can pass on in inheritance, other than real estate?
• The car example I gave a few posts back: If I buy a car and let my sister drive around town in it for $100/month because she can’t afford to buy a new car. She’s the one gassing it up, washing it, getting maintenance on it, etc. Am I an absentee owner? Will I get in trouble under the new reign of “requisite presence” ?
• Is there a way to answer any of these questions without being arbitrary?

It seems like to institute this system it requires a TON of rules and regulations - arbitrarily government mandated rules and regulations. The alternative, the current system, where people are FREE to do as they choose with the land they own - governed by the singular law of right to property - seems to be the more obvious and elegant solution.

[Human_Action]

Another flaw I see is that this plan effectively rolls back one of the cornerstones of a prosperous society: the division of labor. Suddenly, a person who is good at picking investments can’t profit from this skill unless he can also supervise farmhands or a building crew. And a person who is good at supervising farmhands or a building crew can’t get financing from someone else who is good at picking investments. Skills go to waste for no good reason.

[LinusK]

@pancakes3

Can you identify who’s getting taxed to generate the profits in the first case?

I don’t know what you mean: if the farmer’s making more or better stuff, and getting paid the full value of it, no one’s being taxed.

If the farmer’s making more, but the owner’s keeping the value as extra profit, then the farmer’s being taxed - or “taxed” - for the benefit of the owner.

[Shodan]

@SlackerInc

**LinusK **was right: a lot of this stuff is really just a privilege granted to us by the government.

One of your problems in pushing this is that the USA was founded on the idea that this is 100% wrong.

The Founding Fathers believed that we were endowed by our Creator with certain inalienable rights, that to secure these rights governments were created, and when those governments ceased to protect those rights it was the right and the duty of the people to alter or abolish those governments. IOW the rights come first and the government later. Rights are not granted by government at all.

Maybe you don’t believe in a Creator or in inalienable rights. That’s too bad, but it doesn’t matter all that much. In order for me to acquiese to your idea of us all getting no more and no less than the government feels like giving us, you have to convince me. And just saying so isn’t enough.

Regards,
Shodan

[LinusK]

@SlackerInc

Ha, this is great. You should have left the question there, without muddling it with the Galt stuff.

But the point of the Galt bit was that people so often treat money as if it were real wealth, when it’s not. When Galt arrives at his island paradise, with all his money, no matter how much it is, he’ll slowly starve. Because money doesn’t produce anything. It doesn’t build houses or make food, or fix broken legs. It’s work that’s the source of wealth. In order for Galt to be rich, he’d need to bring workers with him, and he’d need to make sure they kept working.

Maybe he could charge them rent.

[pancakes3]

@LinusK

An increase in the farmer’s earned income would come from working harder, or longer, or more efficiently, or otherwise doing something that resulted in more or better food.

…

In the first case, everyone’s better off: the farmer’s richer, and there’s more (or better) food.

@Pancakes3

Can you identify who’s getting taxed to generate the profits in the first case?

@LinusK

I don’t know what you mean: if the farmer’s making more or better stuff, and getting paid the full value of it, no one’s being taxed.

If the farmer’s making more, but the owner’s keeping the value as extra profit, then the farmer’s being taxed - or “taxed” - for the benefit of the owner.

You assert that profits are a TAX on labor. Assuming that there is an owner who’s separate from the farmer. That owner is not going to be engaged in some revenue sharing program. It’s going to be sharecropping - renting out the land to a farmer similar to a feudal system. Monthly rent for the right to farm that land.

The farmer can generate more profit by:
a) works more hours
b) working more efficiently
c) planting a more profitable crop
d) the market demand arbitrarily going up
e) some other way

So what’s the difference, tax-wise, between a farmer that doesn’t generate more profit and one that does? The land owner gets just as much rent either way. The farmer walks away with money in his pocket. Who’s getting “taxed” ? Please don’t say the consumer, because that’s just patently false - and not what you asserted originally.

[pancakes3]

@LinusK

But the point of the Galt bit was that people so often treat money as if it were real wealth, when it’s not. When Galt arrives at his island paradise, with all his money, no matter how much it is, he’ll slowly starve. Because money doesn’t produce anything. It doesn’t build houses or make food, or fix broken legs. It’s work that’s the source of wealth. In order for Galt to be rich, he’d need to bring workers with him, and he’d need to make sure they kept working.

Maybe he could charge them rent.

If Dr. Galt arrived to his paradise with no money and only the ability to fix broken legs, no matter how good he was at fixing broken legs, he would starve just as quickly as the billionaire Galt. In order for Dr. Galt to be rich, he’d need to bring people with broken legs with him, and he’d need to make sure their legs kept breaking.

Maybe you should consider rethinking your position.