Wealthy people whose primary source of income is from a salary pay higher taxes than those who draw most of their earnings from investment income. This is because the tax rate on capital gains is set at 15% while the tax rate on earned income (salary) could be well over 30%. A wealthy person with both earned income and investment income could pay an overall average of 18.1%, depending on how much wealth is derived from which type of source.Obama isn't talking about making the rich pay a higher PROPORTION of their income than the middle class in taxes. His "Buffet Rule" proposes that the rich shouldn't get away with paying an overall (income + capital gains) LESSER proportion than the middle class.
In 1958 the top 10% income share, including capital gains (income from investments), accounted for 33.56% of the wealth in the US. By 2008 this figure had risen to 48.23%. This means that the 10% most wealthy people in America own nearly 50% of our country's income. The gap between the very wealthy and the middle class is expanding [see chart below]. And as this gap widens our middle class is shrinking and the poor are sinking further into poverty.
While most of the people making up this top 10% are sure to fight tooth and nail against an increase in their overall taxation rate, we have to do something: our economy cannot withstand this growing gap.
Reducing this gap is not class warfare, it is a matter of economic survival. The question is, what is the best way to accomplish this?
Do you have any suggestions?
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- http://www.tnr.com/blog/timothy-noah/95149/david-brooks-unwell
- http://g-mond.parisschoolofeconomics.eu/topincomes
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