Accession to Wealth

In researching for an upcoming post on the Income Tax and a recent U.S. District Court ruling, I ran across the following from this web page:

The Supreme Court has therefore stated that the income tax applies to all "undeniable accessions to wealth, clearly realized, and over which the taxpayers have complete dominion." Commissioner v. Glenshaw Glass Co., 348 U.S. 426, 431 (1955)). (The requirement that accessions to wealth be "realized" means that increases in the value of assets are not taxed to the owner as capital gains until the asset is sold.)

 

So, if I sell my own labor for $100, I must calculate the gain based on the difference between what I paid for my own labor (not what it is worth) and what I receive for it. Because I paid nothing for my own labor, everything I receive is income.

 

Looking at it another way, if I start the week with no money, am paid $100 for my labor, and end the week with $100, I am $100 richer than I was at the beginning of the month. That $100 gain is an "undeniable accession to wealth" (in the words of the Supreme Court), and therefore income.

This was found under the heading of, "Wages are not "income" because wages represent an equal exchange of labor (a form of "property") for money (another form of property), so there is no gain and no income." I tend to disagree with the author. Here's why:

If I sell my labor for $100 and put that money in a sock and bury it in my back yard, how long do you suppose it will be before I collapse from hunger, from being sick? If I don't take the money I was compensated for my labor and convert it into the needful things in life, I won't be around very long. To put it another way, while I'm laboring for another, I'm not laboring for myself. I'm sacrificing my efforts in the hope that I'll be able to exchange my effort exerted for another for the fruits of from other's who exert their energies. This is what is commonly called the division of labor.

 

Finally, he asserts that my labor is worth $0. I strongly disagree. Look at it this way. If a business sells blue widgets for $10 and pays $7 for their production, their taxable gain on their sale is $3. If the company quits spending the $7 on production, they'll be in business as long as they have blue widgets. Once their supply runs out, they will be out of business. The same is true of labor. My labor is not free. We all must spend money in the production and maintenance of it.

 

There's more to follow on this, but I wanted to throw this out there for comment.