On July 29, 2013 Bruce Watson writes on DailyFinance.com:
For anybody who caught last year’s brouhaha over Mitt Romney’s taxes, it should come as no surprise that poor, middle class and wealthy people all get their money from different places — and pay taxes in very different ways. This week, the nonpartisan Tax Policy Center released a report that made the differencesbetween the classes much more explicit — and went a long way toward explaining America’s tax policy.
In some ways, the TPC’s analysis looks like a bell curve. On the lower end of the spectrum, the poorest one fifth of workers get 49 percent of their income from wages and 40 percent from transfer payments — another name for benefits like Social Security payments and food stamps. Over the next three segments of the population — the second, third and fourth quintile of households — the amounts of wage income steadily increase to 73 percent of household income and the amount of transfer payments steadily decrease to 7 percent of income. In other words, as households move from the lower class to the middle class, they get less money from the government and make more money at their jobs. At the fourth quintile, the second-to-top level of households, the vast majority of money is coming from work, with a little sliver coming from transfer payments.
But among the richest 20 percent of households, the income structure suddenly changes. For them, only 60 percent of income comes from wages, and only 2 percent comes from transfer payments. Filling the gap, the income from business and investments vastly increases. In the fourth quintile, the top of the middle class, 8 percent of income comes from business and investments; in the top quintile, that more than triples, to 28 percent.The difference is even more noticeable within the top quintile. The richest 1 percent of households only get 39 percent of their income from wages and salary, contrasted with a whopping 53 percent from investments and business earnings.
Again, as should come as no shock to people who watched the 2012 presidential contest, the differences between these income sources figure heavily in your tax bill: Long-term capital gains tax rates top out at 23.8 percent, while standard income taxes go all the way up to 39.5 percent for earners in the top percentile. Put another way, income from long-term investments is taxed at a nice discount compared to income that comes from wages.
It should be obvious that the wealthy are rich because they own productive capital assets embodied in investments and business ownership interests from which earnings are generated as capital gains, dividend and interest income.
The proposed Capital Homestead Act, advocated by the Center for Economic and Social Justice (www.cesj.org), would create opportunity for Every Citizen to become an owner of FUTURE wealth-creating, income-generating productive capital economic growth. As a result, we would be able to grow a technologically advanced and ecologically sustainable economy at far faster rates than today, and in ways that offer EVERY American a private-property, market-based means to accumulate a growing ownership stake in the American economy through a personal tax-sheltered Capital Homestead Account (CHA). It would protect private property rights of existing owners and radically reduce existing levels of redistributive taxation and the growing dependency on charity. It would create new private sector jobs for the unemployed, underemployed and those who left the work force as we build a FUTURE economy that can support general affluence for Every Citizen.
Support the Capital Homestead Act athttp://www.cesj.org/homestead/index.htm andhttp://www.cesj.org/homestead/summary-cha.htm
http://www.dailyfinance.com/2013/07/29/rich-vs-poor-taxes-income-investing-benefits/
