Less tax for little work

I've started doing our income taxes for the year and had a pleasant surprise.  If I calculate the tax in a straightforward way, we will owe a few hundred dollars.  If I calculate the tax with the worksheet for capital gains and dividends, we will get a refund of a few hundred dollars!

This is surprising because our income consists of Social Security, IRA withdrawals, two teensy-weensy pensions, and capital gains and dividends.  Capital gains and dividends are less than a quarter of our total income.  Social Security is about half, but it isn't all taxable.

An interesting thought: Social Security is considered an entitlement, but the capital gains and dividends are considered our due.

We worked for decades paying Social Security withholding; we buy and sell stocks with a click of the mouse.  The capital gains are a form of gambling and really don't contribute to the economy other than providing liquidity for the market and fees for the brokerages.  The dividends are based on the profits created by thousands and thousands of workers providing goods and services.  And again, we didn't provide the capital for these companies; we bought it from someone else.  For providing market liquidity, we supposedly are "makers".  As Social Security recipients we are "takers".

"Makers" are takers and "takers" are makers

The "masters", in Adam Smith's parlance, claim they are the makers, the one's who get things done.  Or are they the "takers" who depend upon other people's work but take credit for it?

Adam Smith did write, "It is the stock that is employed for the sake of profit, which puts into motion the greater part of the useful labour of every society. The plans and projects of the employers of stock regulate and direct all the most important operation of labour, and profit is the end proposed by all those plans and projects."

In other words, if someone doesn't invest the capital, lots of things won't be done.  Would you be reading this on your computer if there hadn't been the capital to start a company that made a lot of computers?

Smith also wrote, "The annual labour of every nation is the fund which originally supplies it with all the necessaries and conveniences [sic] of life…" and "The liberal reward of labour, therefore, as it is the necessary effect, so it is the natural symptom of increasing national wealth. The scanty maintenance of the labouring poor, on the other hand, is the natural symptom that things are at a stand, and their starving condition, that they are going fast backwards."

If there are no laborers, then there is no one to carry out the "plans and projects of the employers of stock".  Michael Dell may have been able to assemble computers in his dorm room, but he needed others to make the parts.  As his business grew, he needed others to assemble and ship the computers.

But how many CEOs started the companies that they head?  Very few. Most either came up through the ranks of management or were hired from outside.  They weren't the ones who put "into motion the greater part of the useful labour".  Thus, they are not the ones who make, but are the ones who take the work of others.  In fact, they often consider the actual makers as taking from the company and as such are disposable.

How many restaurant chain CEOs are cooking the hamburgers?  Where would the CEOs be if there were no hamburger cooks, no cashiers, and no clean-up crew?  If their companies have a good year, how much of their bonus are they willing to pass on to the people who made those profits possible?

We have at least one good example of the effects of treating well-paid employees as expenses rather than assets.  I saw Circuit City's demise coming when they fired all the high-paid experienced clerks.  These clerks made the sales; the executives took the profits of those sales.  See "Labor is not a commodity".