Income Inequality—Day Four

If you’re only contribution to the economy is already having enough money you don’t have to work, you are golden per U.S. tax rates. Let’s look at income and taxes of some hypothetical couples to see how truly regressive the U.S Tax system is. Working folks providing a product or service are heavily penalized for having that job and earning the exact same income as those who already have enough they no longer have to work. In short the lowest taxes are paid by folks who don’t have to work.

Dick and Jane LowDick and Jane MiddleDick and Jane BetterDick and Jane HappyDick and Jane Best

Here are five couples all with two kids, no exotic deductions just the basics.

Mortgages around their annual income which is under the U.S. norm, and I’ve used the same rates etc. for comparison.

Again there are no expensive accountants working in my examples…I expect the well off would be even better off if there were. Take a look.

Now let’s compare the Betters with the Bests. The Bests made exactly four times the income but since they didn’t have to “earn” it to use the IRS terminology, they paid only 2.6 times the tax.

Dick and Jane Happy have $194,876 left after taxes in spite of not having jobs while Dick and Jane Better have $183,336.80. Of course the Happys are happy; they brought home the exact same amount as the Better’s but after taxes kept $11,539.20 more, simply because they are financially positioned to not to have to work.

There is my rub; that folks who are working hard to provide a product or service to our country and economic base are being penalized for having that job and earning income. Meanwhile “unearned” income is taxed at a significantly lower rate. Just as in the Hungerford study, we see here how the U.S. tax system is subsidizing the income inequality wedge.

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