From the article:
Let’s say you and I are neighbors. You’re an emergency room doctor, and I don’t work, thanks to a pile of money my grandparents left me.
You spend your days and nights stitching up gunshot wounds and helping children survive asthma attacks. I’ve gotten really good at World of Warcraft, winning EBay auctions, and frying shishito peppers to just the right crispiness
Let’s also say we both report $300,000 in income to the Internal Revenue Service this year. Who pays more in taxes?
You do, by a lot. You owe the IRS about $38,500 more, assuming each of us pays the maximum with no special deductions. I also have more flexibility to lower my burden with tax planning strategies and other tricks, and I get to skip about $24,000 in payroll taxes that you and your employer must fork over each year.
This isn’t some quirk of the U.S. tax code. Politicians have intentionally set tax rates on wages much higher than those on long-term investment returns. The U.S. has a progressive tax system in the sense that well-paid workers sacrifice much more than poor workers on their “ordinary income.” But Americans with so-called unearned income—qualified dividends and long-term capital gains—get a break. A billionaire investor can pay about the same marginal rate as a $40,000-a-year worker, a fact Warren Buffett has famously lamented.
Source: Why American Workers Pay Twice as Much in Taxes as Wealthy Investors – Bloomberg
This has always irritated me. When I took my tax classes in college, I learned that if I work for a living I pay twice as much in taxes as some trust fund baby who inherits everything.
I picked the picture above because it really highlights the taxation differences.
What I really like about this article is it shows how Paul Ryan’s tax code proposition still forces workers to pay twice in taxes.
From the article:
The first line asks filers to write down their previous year’s wages. For you—the ER doctor in the fictional scenario above—that would be $300,000. The second line asks filers to add just half of their investment income. For me, that would be $150,000.
The form’s simplicity makes its priorities clear: No matter what rates are applied or which deductions or credits are allowed, a worker would end up paying twice as much in taxes as an investor with the same income.
These folks that make their money this way are paying taxes at a historic low right now. They are putting in the same as someone that works minimum wage because they can throw some dollars at a few charities here and there.
This is why we need a good sensible marginal tax rate that doesn’t favor the richest people in our country, and force the poorest amongst us to shoulder the biggest tax burden.