[jagged-chisel]

The annoying/sad/infuriating thing is the ultra wealthy don’t have “income.” Technically, according to IRS rules, much of what they experience (housing, food, etc) should be classified as income. But their lawyers and accountants help them keep that looking quite low.

[smt88]

This report is only about wages, so even if the ultra-wealthy reported their real sources of income, they wouldn’t shut up as “labor” the way this defines it.

[lotsofpulp]

Capital gains not being considered earned income is simply sensible use of terminology to categorize different ways of amassing purchasing power. For example, in order to carry out the linked analysis.

It has nothing to do with the IRS or taxes.

[scottyah]

Income goes straight to a person, capital gains is a little return from other people generating income. Basically a MLM lol.

[Schiendelman]

I used to think this - but when I talked to a tax lawyer friend and we walked through the steps they take, usually they're just deferring taxation that does end up getting paid by an entity eventually.

[ck_one]

Capital gains tax is clearly lower than income tax. So why did you change your mind?

[nickff]

Not the commenter you replied to, but one thing to note is that capital gains tax (at least in the context of investments in corporate equities) is applied after corporate taxes. Profits and reinvested earnings are taxed as profits, and they're two of the key components to valuing an equity.

As such, when comparing income tax and capital gains, you should add the impact of corporate taxes. Incidentally, corporate taxes are why many small business owners pay themselves wage income, rather than doing stock buybacks or dividends.

[topgrain2]

> Incidentally, corporate taxes are why many small business owners pay themselves wage income, rather than doing stock buybacks or dividends.

You've been sold some BS. Usually this is because you're required to take a "reasonable" wage for your role in a company. Otherwise I guarantee you every independent contractor out there (among others) would be operating in a way that made 100% of their income business profit, rather than wages, as it has enormous tax advantages. Approximately everybody tries to find out the least they can take as wage income without pissing off the IRS, and sets their "wage" to whatever that is.

[nickff]

Many locales have laws that do not allow remuneration above the 'reasonable wage', to prevent tax circumvention by having employers spread wage payments across multiple family members of employees, but I am not familiar with any jurisdiction with a minimum reasonable wage law or regulation. Could you please link some source for the claim that business owners are required to accept a 'reasonable wage'?

[topgrain2]

https://www.irs.gov/businesses/small-businesses-self-employe...

[tonyedgecombe]

I've often wondered why we don't abolish corporation tax and instead tax capital gains and dividends like normal income.

[nickff]

This would be my personal preference, as I believe that voters often overlook the impact of corporate taxes, and there are just too many (different) taxes.

[daedrdev]

Because capital gains taxes really discourage selling which gums up the economy

[triceratops]

Wouldn't prices of assets just rise to compensate? People still need liquidity.

[saghm]

If the income was earned through dividends, maybe this would be a reasonable argument. Most of the time stock just gets bought and sold by investors rather than the company itself though, so it's not clear why corporate tax would have anything to do with this.

Sure, the stock price should somehow be tied to the actual value of the company, but for a while now it's been mostly indistinguishable from a Ponzi scheme other than a few companies that do sometimes decide to buy back some stock, which makes it slightly less sketchy but if the value is from the company buying it back, it's a lot closer to debt or a bond, which is not at all how anyone treats it.

[nickff]

I agree that in a bull market, many corporations are not purchased and sold at book value. That said, we are on the largest bull-run in history, so we shouldn’t treat this as the norm, and base all our long-term decisions on the current situation.

[saghm]

So if I'm understanding correctly, your argument is that it doesn't make sense to make people who make more money pay the same rate of taxes as regular people do because we should ignore the fact that they've been doing it for longer than ever before?

[panzagl]

So if I buy and sell Pokeman cards I shouldn't have to pay any tax because WotC pays corporate taxes?

[nickff]

I am not saying that one party paying taxes means that no counter-party should. I am just saying that the impact of different structures should be accounted for.

[Schiendelman]

Their income would be capital gains regardless of whether they use these methods or not.

[toomuchtodo]

If they donate the wealth to their own foundation to continue to hold close and control, it doesn't get taxed. If they borrow against the wealth at low interest rates until they die and the basis is stepped up ("buy, borrow, die"), it doesn't get taxed. Certainly, deferment is a component, but there are obvious examples of the very wealthy operating in a manner to avoid taxes entirely when they're able to (realizing the benefit of the wealth without having to realize a taxable event). Trust stacking is a recent fad as well, although I don't have enough data to say whether it is a material concern from a tax revenue perspective.

Silicon Valley Is Obsessed with 'Trust Stacking,' and the IRS Doesn't Like It - https://news.ycombinator.com/item?id=48727963 - June 2026

[Schiendelman]

The cases you're talking about are all delaying taxation, not eliminating it. Eventually someone has to draw that wealth - the foundation has to spend for public benefit to be eligible for 501(c)3 status, for instance.

[toomuchtodo]

How Elon Musk's secretive foundation hands out his billions - https://www.theguardian.com/technology/2019/jan/23/how-elon-... - January 23rd, 2019

"Spending for the public benefit" has a lot of latitude.

[saghm]

I also don't think they addressed how borrowing against the wealth doesn't require any immediate taxes (and is often low interest, given how being a billionare means you get more favorable terms). There's nothing stopping someone in that position from just deferring taxes on the money they currently have, borrowing against it, and then investing that to turn into more money with taxes deferred even further so that they can use the proceeds to pay the previous deferred taxes and keep the difference.

[Schiendelman]

That requires their investments to keep going up in value. That doesn't last forever, the assets that people borrow against eventually need to be sold to pay back that loan. When they sell to make payments, those are taxable events.

[Schiendelman]

If any significant part of that article is true, I see self dealing that would already be against IRS code. It's just a matter of enforcement. We often already have the laws to solve the problems we identify.

[Psillisp]

Was your ‘friend’ Jeffery Epstein?

[micromacrofoot]

even with this scam the top 1% of earners still have more annual income than ~75% of the population