How Tax Policy Created the 1%

Source: Julia Ott, Dissent, April 18, 2017

….Debates about federal taxes tend to focus on the tax rates levied on ordinary earned income and on tax deductions taken mostly by wealthy households. But there’s another front in the battle for tax justice: the tax code’s preferential treatment of income from capital gains (that is, from profits on investments). This preference fuels inequality and financialization alike.

Thanks to this tax break for capital gains, households keep more of their income from investment after taxes than they keep from their wages and salaries. This is because income received from profits on the sale of investments is taxed at a lower rate than the same amount of income from salaries and wages. Because the wealthiest households earn the bulk of capital gains every year, the tax code’s preference for this form of income overwhelmingly benefits the rich…..