The Value of Labor

Unsplash | @eastlondonphotographer

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As we come out of Labor Day weekend, let’s talk about labor. More specifically, let’s talk about the way the law treats labor.

You’ve likely heard dozens of politicians talk endlessly about how American workers are the backbone of our country, and how the value their labor creates for their communities is what makes America great. But talk is cheap. When it comes to what really matters, legislation, too many lawmakers have very different priorities.

Across virtually all policy areas, labor in America goes largely unrewarded. We see this manifest in a variety of ways – from a lack of living wages to a tax system that systematically benefits rich people and their money over those who work for a living.

The single-most significant problem millions of American workers face on a daily basis is the simple fact that they’re not paid enough. The federal minimum wage is only $7.25 an hour, which leaves millions of full-time workers in abject poverty while dragging down the wages of the rest of the workforce in turn.

$7.25/hour, or just $15,000 a year for 40 hours of work a week, 52 weeks a year, leaves the overwhelming majority of these workers living below the poverty line, unable to adequately provide for themselves or their families.  The average rent for a one-bedroom apartment, for instance, is almost twice what a person working minimum wage could afford. Even with several roommates, affording a place to live is a serious struggle for low-wage Americans.

On the tax front, income earned from labor is taxed at a significantly higher rate than income derived by wealth (called “capital gains”). This puts working people at a perpetual disadvantage against the already-wealthy.

The tax most people pay on their earnings – ordinary income tax – is taken from money earned through labor. Americans go to work, receive a paycheck, and pay income tax. Capital gains taxes, on the other hand, are the taxes paid on profits that come from the sale of assets – wealth someone already owns. Investors buy a stock or a piece of real estate and then sell it for a profit. The profit is considered a capital gain, and as long as the investor holds on to that asset for at least a year, they pay much less in taxes than they would on ordinary income of the same amount.

Make no mistake, this is a massive tax break. A billionaire earning $800 million a year in capital gains pays a lower top tax rate than someone earning $90,000 a year in ordinary income.

And not surprisingly, most people earning investment income are already wealthy, meaning this two-tiered system overwhelmingly benefits rich people. If this country values labor so much, why are the incomes of idle billionaires being taxed at a lower rate than working Americans?

Our elected officials may talk endlessly about the value of a hard day’s work and the nobility of labor, but our policies and tax code are deliberately designed to reward wealth over labor. If you work for a living, you should understand one thing: this country values a dollar made off a rich investor’s money more than a dollar made off your sweat.

Even when workers are being paid a respectable wage, they keep less of every dollar they make than someone who lives off their investments instead of working. This is a very different picture than insincere politicians try to paint when they exalt labor. We must hold elected leaders to their word when they vow to support hard-working Americans. They need to stop talking about labor, and start supporting it in the only way that matters: pass legislation that materially improves the lives of working Americans.

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