> salaried workers can't use leverage to increase their earnings
Of course they can. They can invest, say, 20% of their income into stocks. They can borrow money to invest into stocks, too.
> salaried workers can't use leverage to increase their earnings
Of course they can. They can invest, say, 20% of their income into stocks. They can borrow money to invest into stocks, too.
I'm talking about the direct work output. As in your main income. Obviously many people can afford a mortgage, and maybe the house is worth much more in the future. Or stocks, or bonds, or other financial instruments.
But the work you produce - not so much, for many common professions. If you're working on a assembly line, your work input/output curve (transfer function) will look linear in the productive zone. If you work 20 hours producing 20 units, 40 hours producing 40 units, then working 60 hours will likely yield 60 units. But once you start moving up after that, it might not be very linear - fatigue will set in. There's some saturation point.
On the other hand, the difference between some entrepreneur working 20 hours and 60 hours will likely make all the difference. Even going up to 80 hours can make or break it (and I'm not saying this as someone who's glamorizing long hours). Throw in external forces like investor money, and your input could generate some factor N output.
You could give some factory worker a million bucks, and it would not increase their work output.
Sorry for the ramble, my point was just that the work people do is different. But you are of course correct that spending your resources on different kind of work will yield more. Investing your money in ownership (stocks, real estate, etc.) can (will) increase your wealth.
Plenty of workers have to take loans just to pay rent or healthcare. And even if they did borrow to invest, they can't sell without paying CG. And what if they bet wrong?
When I couldn't pay the rent, I acquired a roommate. Very few young people need to see a doctor.
As for CG taxes, they don't apply if you don't sell, and no CG taxes are owed if the gains are less than $49,000.
> And what if they bet wrong?
Everything in life is a risk. The idea with stocks is to diversify, which you can do by buying an ETF.