The taxation rate of wage earned income / by kevin murray

For the most part, those that make their wages by receiving a paycheck for their work, are doing so, because that is the way that they earn their living, therefore, the tax rate that they pay on that wage income is of special pertinence to them.  So too, the tax rate that people pay on unearned income, such as through dividends, capital gains, and interest makes a material difference to those individuals receiving that income, but these two forms of income are two very different things.


For instance, the fundamental difference between wage income and unearned income is that the person making that wage income is actually laboring for it, whereas the person that is receiving that unearned income, certainly is not personally laboring for that income; rather the money that has been invested is earning income for the owner of that money.  While both of these forms of income are taxed, the fundamental question actually comes down to the fairness of such taxation, especially in regards to which form of income should be more heavily taxed, and  which should even be taxed to begin with.


Originally, the federal income tax applied only to the wealthiest Americans, and not to ordinary earning Americans.  In fact, it's fair to say, that the original federal income tax was specifically passed to "soak the rich" but has morphed into soaking relatively modest wage earners and above, with all sorts of workarounds for the very rich to avoid paying their fair share, or their anticipated forecasted share.  This would indicate in practice, that the Federal tax authorities believe that the easiest way to collect taxes, is to collect it from individual wage earners, upon each time that they receive a paycheck, as a sort of a pay-as-you-go system, of which, various taxes are taken out of wage earners' paychecks, for State, local, Social Security, Medicare, and Federal taxes.


On the other hand, with unearned income, such is only subject to the higher ordinary income tax rate for dividends and short term capital gains; of which this pales in comparison to all those that have a wealth of money and are gifted at getting their taxes reduced to a minimum because they are helped greatly by the fact that the long term capital gain tax rate is just 15%, and subject only to  the 20% tax rate, when their taxable income is above $464,850 for those that are married; whereas wage earners that are married, are subject to a 35% tax rate for all taxable income above $400,000.


Clearly, wage earners are getting the short end of the stick, especially all those that are laboring and making at least a decent wage or better, for they really are net tax payers, and not privy to special tax considerations and set asides that the biggest corporations and wealthiest Americans are able to avail themselves of.   In point of fact, wage earned income should be taxed less, and unearned income should be taxed more, for the difference between the two, is that wage earned income is from actual labor and productivity, whereas unearned income, is fundamentally, unearned by any personal labor, whatsoever.