Reference no: EM132404494
Most other taxes are flat (sales tax, excise tax, property tax, etc) meaning for these taxes lower income wage earners the total dollars paid will represent a greater percentage of their income. Example: 7% sales tax on a $20,000 car is $1,400. For those with income of $30,000/year, $1,400 is 4.7% of their income, whereas $1,400 is only 3% of income for those with income of $50,000/year.
Some people (generally those who invest in the stock market) receive a portion of their income from dividends and capital gains (passive income), which is generally taxed at a lower rate than earned income (wages). In 2016, the majority of people with passive income had that income taxed at rate of 15%, whereas those with high income paid at a rate of 20%, while those with lower income (10% or 15% income tax brackets) did not pay any tax on passive income. Passive income is not progressive, like earned income, so wherever someone falls on the income scale (low, mid, high), he/she pays the applicable rate on the entire amount. Someone who is very rich and does not work (no "earned" income, but rather income from ONLY investments, is taxed only at the passive income rate. In other words, we ALL pay higher rates on earned income and lower rates on passive income.
Is this fair or is this wrong? Why do you believe so?
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