[pdonis]

> I think we can clearly say that capital gains are not earned.

No, we can't say that at all, because most businesses are small businesses, owned by the people who run them, and capital gains are the owners' income from running the business.

The money startup founders make, from building something as PG describes, is also capital gains. So again, no, we can't say at all that capital gains are unearned.

[crote]

That's simply not true. No CEO is going to accept zero salary, just because the value of his stocks will increase - especially not with small companies which aren't publicly traded.

In fact, in some countries not paying yourself a fair-market-value salary is illegal!

[pdonis]

> No CEO is going to accept zero salary, just because the value of his stocks will increase

Maybe not zero, but PG's "ramen profitable" basically means the only "salary" the founders take is enough to cover their living expenses, which are kept minimal. So the vast majority of the money they make (remember we're talking about a billion dollars here) is capital gains, not salary.

Of course CEOs of large established companies (not startups) take large salaries--and then usually get stock options and own a considerable amount of company stock, so they get compensated three different ways. Which arguably gets into "unearned" territory--but at that point the company is way past being a startup.

> especially not with small companies which aren't publicly traded

Privately owned companies can still be sold, and the profits from the sale are capital gains. But I agree that in this case that's not the primary way the owners of, say, a mom and pop restaurant get compensation. I should have been more specific that I was talking about startups.

[bandofthehawk]

> no, we can't say at all that capital gains are unearned.

Yes, we can say this. The IRS classifies capital gains as unearned income.

[pdonis]

The way the IRS uses technical terms has nothing to do with the ordinary lay person's concept of what is earned and what is not. (The main function of the IRS definition of "unearned income" is to define what kinds of income don't have to have payroll tax withheld.)