Tax Analysts Blog

Capitalists and Workers

Posted on Dec 9, 2009
Yesterday's post illustrating the relatively low tax rates paid by the super rich was cross-linked to blogs at the New York Times, the Wall Street Journal and CNN. Today' post follows up with a look at the huge differences in the composition of income among income classes. All data are for 2007 and are from the IRS (Table 1.4).

The first figure shows the composition of income for middle class families earning between $50,000 and $75,000. More than three quarters of their income is from wages and salaries.

The second figure shows the composition of income for households with income over $10,000,000. More than sixty percent of their income is capital gains and qualified dividends. These income sources are currently taxed at a 15-percent rate. This explains the low tax rates paid by high-income households.

It is likely Congress will allow this rate to increase to 20 percent at the end of 2010 when the Bush tax cuts expire.

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