In what ways does the system favor the rich, even if they do not work hard to earn their wealth?
Tax rates on many forms of unearned income, such as capital gains, interest income, and dividend income averages 15 percent. On the other hand, earned income (such as wages for work performed) of more than $39,000 a year is taxed at a 25 percent or higher rate. This means if you have, say, inherited $5,000,000 from your grandparents, you could invest it and receive, say, five percent a year from interest and dividends. This means you would receive $250,000 a year for doing no work at all. You would lose about 15 percent of this in taxes, so your take-home pay would be $212,500. You could comfortably float around the world doing nothing but having a good time on that income.
Now, let's say you, or you and your spouse together, working hard, earned $250,000 in wages for the year. Perhaps you have worked long hours as a doctor, saving people's lives. Your income would be taxed at 33 percent, more than double the rate on the unearned income described above.
Clearly, the person with the unearned income could more easily accumulate more wealth, just by saving the money saved by paying a lower tax rate.
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