Monday, April 18, 2011

Tax wealth like work

Nowhere is the disconnect between the values we as Americans profess to admire (hard work, etc.) and those we actually do admire (being rich) more evident than in the way we tax income made from work and income made from already having money, either by investments or inheritance.

It's well known that restoring the pre-Bush tax rates on the wealthy would have more than made up for all the spending cuts the GOP and Blue Dogs were fighting for (whether money was really their point isn't my point this time). But it's rather startling to realize how differently you're taxed if your money comes from earning it (and not the Smith Barney definition of "earning it") than from making it off more money. The more your income derives from money, the less you pay on it. Money not only breeds, but it breeds cheaply.

See these wealth vs. work tax charts.

Update: and see Katrina vanden Heuvel's article where she points out that
Taxing capital gains and dividends at regular income rates would save $84.2 billion in 2011 alone, twice the amount we’re cutting from this year’s budget.

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