Profits are a tax on labor

But the owner of the factory had to put in SOMETHING in order to become the owner in the first place, you must agree? In order to have bought the factory, the owner could have earned money by working construction for other people, or selling turnips, or doing some kind of service - these are contributions, right? Unless someone happened to give the factory them him - but then THEY would have had to have put in something in the first place.

If the owner of the factory could NOT collect profits from owning the factory, why would anyone ever build a factory in the first place?

I’d say it’s not just A & B, but A, B, C, D… etc. You could choose a system likeSweden, or China, or something like Dubai. (Dubai’s pretty capitalistic, isn’t it?) If profits (and rent, and interest, and capital gains and other forms of income derived from owning rather than working) are like a tax, wouldn’t it make sense to minimize the burden?

No, but it is something a lot of folks would consider a necessary evil: something they might have to do, but don’t like to do, and do as little as possible. Also some folks consider taxes a dead weight, an economic inefficiency. Or an unjustifiable transfer of wealth from one group to another.

First. the “risk free rate of return” is typically the US Government treasury bill, which are relatively short term (1, 3 or 6 months), small denomination ($1000). Since they’re backed by the US Government, who has never defaulted or failed to pay, they’re considered risk-free. There’s no rich or poor about it; they’re just a particular sort of financial instrument that if you invest in, you’re all but guaranteed to not lose money in. That being said, the rates are typically minuscule- like 0.040%.

Second, the whole idea is that the guy with the capital is the one who wants to increase it, and as there’s no reward without risk, they usually do something with it, whether it’s invest it in some sort of financial markets or some sort of business directly.

Let’s say some guy has 500,000 dollars. (not really rich, but it’ll do) Let’s also assume he wants to make more money. So this guy takes that half million bucks and opens a hotdog stand. He’s basically taking that money and spending it with the expectation that he’ll make more money from the hotdog stand over time than he’d have if he didn’t spend it in the first place. The gotcha is that hotdog stands don’t necessarily make money- he runs the real and substantial risk of not selling enough dogs to actually make money. As long as he’s the only person working there, there’s nothing weird about anyone else going on.

Let’s say he hires someone to work for him when he’s not there. He pays this dude $8 dollars an hour to make hotdogs, serve them, and collect the cash. This guy is not providing the stand, the supplies, or even the advertising. He’s performing a very simple task of making hotdogs and exchanging them for cash.

Why would he be entitled to any of the profits of the hotdog stand? He doesn’t have anything invested in it other than his own time, which he’s already being compensated for. The owner’s providing the materials, the marketing, the location and the opportunity for this dude to exchange his time and effort for $8 per hour. To me it seems like he should get the profits, if any. And if there’s no profit, then clearly the owner can’t share them either.

Smart owners tend to try to incentivize good performance with a piece of the profit pie, or with other performance-based incentives; they want to make that guy sell one more hotdog rather than be apathetic in the last half-hour of the day.

However, they don’t owe that to their employees.

And if the guy making minimum wage slapping hotdogs together doesn’t like it, why doesn’t he buy himself a hotdog cart, buy a bunch of buns and mustard and wieners and sauerkraut, and go into business for himself?

The answer is, it costs money to build a hotdog cart, therefore it costs money to buy one, it costs money to grow wheat and bake hot dog buns, therefore it costs money to buy them, and so on. Every piece of the hotdog stand coming in or going out or standing still costs money. If you want to own a hotdog stand you have to manage all those things. If you don’t do that, if you’re just slapping hotdogs together, what value did you create? A small amount of value, and your work can be done by millions of potential workers.

Of course the owner doesn’t “deserve” profits just because they own the stand. They don’t deserve profits for taking on risk. They don’t deserve anything. And neither does the guy who owns the cart factory, or the worker who works in factory, or the guy who slaps together hot dogs. The stand owner didn’t create the stand, but the worker who puts together the hotdogs with his hands didn’t create his own hands.

As the man said, Deserves got nuthin to do with it. None of us deserve anything. We came from nothing, and we will go back to nothing, and what have we lost? Nothing! The richest businessman or the most powerful politician in the world will someday be dead and will be food for worms. They might deserve all sorts of things, or might not, but one day they will crumble to dust, and everything they ever had or ever will have will be taken away.

So the question is, while we live, what sort of lives do we want to live? What sort of social rules and customs will allow us to lead our short lives with a maximum chance for happiness and a minimum chance for agony? What’s the best we can do, within the limits of human fallibility?

And it turns out that, in my opinion, the best we can do (for now) is the sort of organization found in North America and Europe and Japan and Australia and other first world countries–liberal democracy, a certain amount of social control, various unwritten rules of social interaction to lubricate the friction of millions of hairless apes living in close contact, an agreement to treat certain things as private property and certain other things as communal property.

Why? Because without those things we get Nazi Germany, or Soviet Russia, or Maoist China, or anarchic Somalia. Or, like most countries, something in between. The more countries resemble first world countries the better off the people living there are, the less the more of a shithole they are.

So why does the laborer deserve the value of their own labor? In many places and times the laborer was considered just another form of personal property, and the fruit of their labor properly belong to the state, or the clan, or their feudal lord, or a private owner. The laborer doesn’t create himself, after all. He is created from his mother’s womb, nursed, fed, diapered, nose wiped, educated, and so on, all by the adults around him. Or not, and the child ends up dead because human children are utterly helpless without adult care.

Is that the kind of world we want to live in? Not me, I’d rather not see children dying in the streets, and so on. We can make whatever choices we want, but we are obligated to accept whatever consequences flow from those choices. Therefore, if we don’t want X, we are obligated to not choose Y if we know that Y will inevitably lead to X. Or, if we choose Y anyway, we should toughen up and stop whining about how unfair it is when X happens.

So we don’t have to allow private ownership of hotdog stands. But if we don’t allow private ownership of hotdog stands, we should accept that there aren’t going to be any hotdog stands. The consequences of various socio-politico-economic decisions might be hard to forsee, but clearly if we don’t allow economic integration larger than a single person we’re going to have to make do with handicrafts and subsistence farming rather than modern industrial civilization.

So you do your job as a left-threaded fizzle polisher for the only company on earth that will hire you for that position, using a $5M precision fizzle polishing machine that the company bought for your use, you collect a decent salary (as they go for fizzle polishers) and benefits… and you resent that the company makes a profit from your services?

(The you being either you, individually or any generic third party you care to envision.)

Associating any part of this with “taxes” because “people don’t like taxes” is just blithering nonsense. You may as well compare them to tithes.

Or if you’re in space, and are clever enough to stockpile air, saving up a little, breathing lightly, until the day that there’s a huge nasty blow-out and you’re the only one with a working stockpile.

There are laws against raising prices excessively – we’ve seen this during hurricanes, when profiteers try to sell sheets of plywood for $500 and are prosecuted for it – but there’s nothing wrong with selling one’s reserve at a fair profit.

In some emergencies, the government might step in and seize the stockpile, under eminent domain rules. This might well happen in a space station during an air shortage.

Well, okay, but that, too, is a valid question. Again, a bit Socratic, but why not? The most basic and primary assumptions of our civilization ought to be explained, now and then, in simple language. Why are organization and ideas worth anything? (And…is a Post-It Note attached to a computer monitor screen a “New Object?”)

It’s philosophical wanking, but it’s valid philosophical wanking.

I’m not conflating given with earned; that is exactly the distinction I’m trying to make.

Consider earned vs. unearned income. Earned income is money you get from doing work. Unearned income, on the other hand, is money you get from owning things: stocks, bonds, land, etc.

Earned income, in other words, is money you get for contributing in some way; by managing, inventing, hammering, consulting, or whatever. Unearned income is money you get for being something. Specifically, being an owner. It means having a legal claim to something, without having to do any work for it.

If you’re consuming without producing, where is the value of what you’re consuming coming from?

I invested money into land, stocks, bonds, etc. I manage those investments. Yet you call the residuals from my investments unearned?

I’m not sure the question, as you pose it, is valid.

If I build a factory, and fill it with machinery, and set up the flow of incoming raw materials and the sales of the finished goods… and then never do another thing myself, except allow workers to use the factory facilities in return for salaries, am I “consuming without producing”? I would say no. I am enabling the factory workers to pursue their specialized trades and earn wages for them, and taking the net profits of the endeavor for providing the facilities, the capital, the management, and absorbing all of the ebb and flow of business. I am taking all the risks, and getting rewarded for doing so.

ETA: Again, I really don’t see how you think your arguments can hold together except in the simplest case where workers can ply their trade solo but are somehow being forced or coerced to do it for someone else’s benefit. There just aren’t that many jobs any more that can be done as an individual.

No. He might have inherited it. He might have won it in poker game. He might have acquired it in a scam. He might have gotten it by right of conquest, or by bribery or public corruption. Or maybe he inherited a trust, and trust fund manager purchased it on his behalf. He might not even know he owns it. Romney doesn’t know what he owns - or at least he didn’t, when he was running for president.

There’s nothing that says the owner must have earned any money, or done any productive service any day in his life. In fact most of the income of the richest of the rich comes not from doing anything, but owning things.

Well somebody had to have done something to get the factory built. It didn’t appear out of nowhere. But the people who drew the plans and erected the beams and organized the construction are unlikely to be the owners. The owners may not ever have seen the place.

Well, the answer to that is: I don’t think they would. So I guess you could say, “We should have an ownership class, who live better than everyone else, without producing anything, so that other people will build factories, in the hopes of joining them.”

But what if you lived on Earth? What if he lived on Earth, didn’t generate the air, but nevertheless owned it. Would you say he provided the air, by owning it?

Well, it requires salespeople. But salespeople are workers, not owners. And they don’t own their clients.

Well, ultimately, so?

We also tax them on their property, so it all evens out. What, exactly, is your point?

Linus…why are you ignoring Lemurs arguments?

The question of how to divide up the value of fizzle polishing is an interesting one. As you say, a lot of different people are involved. There’s the guy who operates the machine. Then there’s somebody who manufactured it, somebody who designed it, maybe somebody who came up with the technology in the first place. Aside from all those people, somebody had to organize and manage the project. In fact there’s a whole company of people involved in fizzle polishing. To suggest, as you seem to think I have, that only the polisher - the last guy in the process - should be compensated… Well, that would be ridiculous.

I’m not sure why you think that’s my argument though.

Suppose that, aside from the accountants, the managers, the salespeople, the IT department, the legal team, the janitorial staff, HR, and everybody else who’s part of the process, there’s somebody else. Somebody who didn’t design, didn’t manage, didn’t market, didn’t sell… in fact, didn’t do anything. Except own. That’s all he does. He owns.

Now suppose he gets a share of the value produced by fizzle polishing - maybe greater than anybody else’s share. Maybe greater than everybody else’s share put together.

Where does that share come from?

If the owner is consuming, without producing, how would you describe it, if not as a tax on workers?

That’s what I’m asking.

You all keep coming back to: well, the owner must have done something.

Is it that you (all) think it’s impossible for someone to be only an owner, without being involved in the process of production?

Yes. That’s more or less the definition of unearned income.

Again, you seem to think it’s impossible for someone to be an owner without also being involved in the process of production. All of the things you talk about: building a factory, filling it with machinery, etc., all those things are work. It’s strange that you think those things have to be done by the owner, because in the ordinary course of things, those things are done by employees of the owner. Not by the owner himself.

I’m not sure what workers plying their trade solo has to do with anything. I’ve never said anything about that.

Put it this way: if the workers don’t need the owner, then why don’t they go into business on their own? Just make stuff without a factory, office, equipment or any other capital investment.

Linus, if you’ve said anything particularly coherent, I’ve missed it. You keep taking straightforward answers (mine and others) and bending them into pretzels to support a simplistic contention: that workers need no one “above” them on any level, and that anyone who is is parasitically extracting “taxes” on their work in the form of profits.

So when a bunch of “workers” standing around an empty field start turning out jet engines, I’ll be real interested to see how they did it without anyone above them, providing the facilities and tools, licensing the patents, purchasing the raw goods and managing the downstream sales and support needs and thus taking no unwarranted “taxes” from them. Hell, I’ll be fascinated to watch a bunch of leaderless, resource-limited workers build the shell of the modern factory that will be needed. Go ahead, paint me the picture.

I am struggling to hold both ends of your argument at the same time, here; you seem to flipping from one position to the other continuously.

No one here, including me, has said the owner does not do work. Quite the opposite; he or she has done the work that brings together the entity, the situation that allows most workers to do their job. The fizzle-polishing operator earns his salary by polishing fizzles - which as you point out requires that machine that does the polishing (built by someone else and paid for, supported and maintained by the owner).

You keep insisting on a simplistic, even primitive notion of “work”; if the owner doesn’t pick up a wrench, he’s not doing work. Very 30s Soviet, comrade, but having done everything between building and lying under hot, greasy machinery and running a 100+ person company, I’ll say it takes willful ignorance to say that an owner does no work by providing and managing the enterprise, and that his clean, dapper hands are unworthy of compensation for the work he does because it’s not with a wrench or a fizzle-polisher.