Investment income (mostly dividends and capital gains taxed at a rate of 15% , and interest), is 60% of the income of the wealthiest taxpayers, according to IRS data for 2009. Business income is about 20%. Salaries and wages are about 20%. Other sources of income are insignificant for the wealthiest as a group.
Salaries and wages, taxed at rates up to 33%, are over half the income of people with incomes less than $500,000 per year. Other important sources for these taxpayers are Social Security, pensions and annuities, and business income.
Is it not a bit more complex? The graph shows that people with incomes over $10M get 60% of their income from investment income. This would include interest, ordinary dividends and short term capital gains, all taxed as ordinary income at 35% (for their income level). Long term capital gains and qualified dividends are taxed at 15%. The other 40% of income for the $10M group is all ordinary income taxed at 35%.
ReplyDeleteFor people with incomes under $500K, the tax on ordinary income varies from 0% to 35%. Not everyone pays the highest or lowest rate.
In describing the tax rate paid by groups at various income levels it would be helpful to identify the effective tax rate on total income, and the total tax bill for each of the income categories. The aggregate tax collected from each income category would be of interest as well.