What percent of your money comes from labor vs capital appreciation? Which is the hand that feeds you?
Below $1M NW, you are probably labor. Above $10M NW, you are probably capital. These thresholds come from asking the question "does a conservative estimation of the passive income from these assets replace a wage?" -- below $1M, no, above $10M, yes, feel free to adjust by playing with the assumptions or plugging in wacky edge cases. The point is that incentives determine so much about politics and the incentives of each individual tend to heavily favor one side or the other which tends to translate into politically relevant policy preferences that favor one side or the other.
The tax code is comically tilted in favor of capital. We should fix that. Unearned income shouldn't be taxed less than earned income, for a start. Also, if I can pay property tax on my house, mega-billionaires can pay property tax on their stock pile. But these are details, and focusing too much on details can be a distraction from the root issue: the tax code is comically tilted in favor of capital, and we should fix that.
A hard line between labour and capital seems a bit reductive. My pension is capital. I have some shares, which are capital. I also have the security of a permanent job, paid by someone else to take risks.
E.g.
> These thresholds come from asking the question "does a conservative estimation of the passive income from these assets replace a wage?"
Net worth doesn't necessarily generate any passive income. You could own a lot of shares in your business that are temporarily spiking, but you can't sell them for some reason. Net worth is a bad way to think about this, because it makes people think billionaires have billions of dollars in cash ready to be taxed away. When in fact if you want people to pay tax on their stock pile, you're talking about taking their property away from them because of how much the market happens to value it right now. Unlike property tax, which is to pay for the services weight of your property on the local area.
> A hard line between labour and capital seems a bit reductive.
What hard line? The hard line I didn't draw with the "what percent of your money" formulation?
> Net worth is a bad way to think about this, because it makes people think billionaires have billions of dollars in cash ready to be taxed away.
If it's not cash it can't be taxed? I brought up real estate as a counterexample to the entire stable of "it's tooo haaaaard" arguments, and that's the weakest of them. I was expecting something taller, like the liquidity argument. But real estate comfortably refutes them all and you didn't even try to deal with that.
> you're talking about taking their property away from them
The government wouldn't hesitate for a second to take my property when they are taxing me waaay heavier than mega billionaires. Why the fuck should I be the slightest bit sympathetic to the sanctity of their literal entitlement?
Some people put property rights on an altar and treat them as a fundamental principle, but here's the thing: property rights (at their worst) have been used to institute and defend literal slavery. If you want to put them on an altar, if you want to treat them as a fundamental principle rather than a tool to economically link investment with return, I'm going to make you own that and defend it. Do you want to go down that road?
Real estate (or more precisely, the land on which the real estate sits) is a completely unique case due to being a resource in inherently limited supply, and arguments which apply to taxing it do not necessarily apply to any other form of wealth.
> I also have the security of a permanent job, paid by someone else to take risks.
So you believe, if a company is failing (owners took the risk and are failing), your job is secure? How? You do realize they can fire you at any moment. Job security is a myth. You risk taking a job just like a investor betting on a company.
Of course. But you at least got paid for your time. That's all you can hope for. Someone who owns a business might well lose all the money they ever put in. That's the risk.
Owners typically don't run a business. Those that do pay themselves a salary. If they don't run a business they are called "investors". Investors typically understand they can lose all of their investment and are in a position where if they do they are fine. This is not true of most people working. Most people working are living paycheck to paycheck. If they fail they are risking far more than an investor in the sense that their life changes. An investor on the other hand already "lost the money" when they wrote a check, and don't need it to survive.
> Owners typically don't run a business. Those that do pay themselves a salary
But they still risk all their capital as well. If you take a loan and use it to open a restaurant, are you taking more risk than an employee who's paid?
> what level of income and/or wealth constitutes rich and how much should they be taxed?
There doesn't need to be a crisp threshold. Progressive taxation without treating labor income as more heavily taxed than generic income which in turn is more heavily taxed than capital gains would be a good start.
This! Serious economics papers are always about studying different progressive tax functions. Nobody cares about specific thresholds to separate "the rich" from the rest. It's a moot point because wealth is a continuous variable (approximately Pareto with tail index between 1 and 2, to be precise).
