Middle-class Americans want to know more about how the wealthy make money

{{ By comparison, the top 0.1% of households get less than 25% of their earnings from wages or retirement income. These top earners receive most of their income from investments — such as interest, dividends and capital gains — and businesses, which often provide better tax treatment, experts say. }}

Yep. The dumbest thing you can do in America, tax-wise, is to work for wage & salary income. The sweet spot is to sustain your lifestyle with tax-free inherited wealth acquired with the stepped-up cost basis. Failing that, a married couple can get a 0% tax rate on the first $123,250 in qualified dividends & capital gains from an investment portfolio – that’s a 4% withdrawal from a $3 million portfolio. (In practice, more than $3 million since at least some of your withdrawal is likely to be a tax-free return of capital.)

The value of most of these large, multi-generational family fortunes is in the lack of taxation over tens of decades, not whatever productive activity the first generation workers and innovators were up to.



Reuters has news item today. Canada wants to raise capital gains tax on gains over $180k US to 67% from current 50%.

Count your lucky stars you live in the US. Capital gains premium (Obama tax) is 3.9% over $200k agi single, $250k married.


It’s the inclusion rate that is increasing from 50% to 67%, not the capital gains tax rate.

In Canada, capital gains are taxed the same as regular income, but only 50% of the gain is included as income.


Agreed. But if everybody followed this advice who would grow and deliver food and other products to stores, build and repair houses, or operate utilities such as water and power?



How do the rich make money? By taking it away from middle class schmucks who support policies that are against their own best interests. The flock of hucksters that run infomertials during PBS pledge drives are part of the cohort out to fleece the middle class.



That’s the rub. Some people can’t follow that advice, and even if they fully understood it, most people won’t.

The other is that the deck seems to be increasingly stacked at his time in history in favor of assets over labor. Ispouse and I studied, earned our degrees, worked hard, saved, invested, built up a relatively small estate of a few million in financial assets plus a paid-for home putting us in the 95th percentile, and the gap between us and the gap between us and the top .1% is far greater than it was when we started out together 45 years ago.
We could have worked till we died and the gap between us and the top .1% would still be growing in a tax system that puts most of the burden on earned income and largely exempts multimillionaires and billionaires.


It has been going on for decades. That’s to be expected with globalization; the world is awash in cheap labor.

Why does that bother you? Do you yearn to be in the top 1%, 0.1%, 0.001%?


That is probably true of all the segments. If someone in the 90% percentile was writing this, they’d likely be able to say “And the gap between me & iampops is expanding and probably will continue…” That’s the nature of the system and the tax code - at the moment. It doesn’t have to stay that way forever, indeed I am pretty sure it won’t.

Whether that change comes about as a result of legislation or pitchforks is the question.

(The Gilded Age ended with the beginnings of the labor movement, progressive ideas, and scandals reported by yellow and eventually all investigative journalists alike. The French Royalty was brought low by other means, including a rather sharp blade dropped from a height while one of the participants stared at the ground.)


It doesn’t bother me for my sake. It bothers me for the sake of the country that is increasingly shifting the tax burden completely onto the backs of workers while they have less and less to spare, and off of the backs of billionaires who have an ever growing share of the assets needed to keep the country from going broke.


“It bothers me for the sake of the country that is increasingly shifting the tax burden completely onto the backs of workers while they have less and less to spare, and off of the backs of billionaires who have an ever growing share of the assets needed to keep the country from going broke.”

Totally agree. Just look at the difference between how investment income is taxed, and how w2 income is taxed. Intercst has posted about this many times, don’t have exact numbers in front of me, but I think he said that a married couple with slightly over $100k in investment income ( qualified dividends, long term cap gains ) will pay $0 in Federal tax. A working couple with slightly over $100k in w2 income will most definitely pay something more than $0, lol. And no FICA taxes are paid on investment income, whereas w2 income does escape that tax until it reaches $168k or so.

So yeah, it is hard to argue with a straight face that the tax code is not rigged. But lower and middle class Americans have voted in candidates that work against them. But hey, they wrap themselves in the flag and preach the religious “patriotism” that so many of their constituents desperately want to believe, so all is good. Gotta find a boogieman to attack and blame it on them, and that seems to be an exceedingly easy way to dupe the voters.


Honest work is not dumb. You are being defensive.

An honest day’s work is good for the soul. It is good for morale in other words.

A good friend of mine never works. He has the money never to work. He suffers from depression and other maladies. I wonder if he had to make a living if his symptoms would be a lot less. Struggle is good for people. Not wanted but good for us. My friend has a business IQ that is off the charts.


People keep asking me why I don’t leave Michigan, considering my displeasure with the priorities of the (L&Ses) who ran the state for decades. My reply has always been “because most states are run the same way”.

Recently, there was a post about which states have regressive tax policies. Turns out, most states, 41 of the 50, have regressive tax policies that benefit the rich at the expense of everyone else. Michigan is only the 34th most regressive. Lately, with the current Gov, and a legislature that, for the first time in forty years, was elected in districts that were not wildly gerrymandered to benefit the Shinies, some things have been done to reduce the regressiveness of policy. If the Shinies regain control in Lansing, it will be back to the old program of defuding public education, defunding road maintenance, defunding cities and counties, and raising taxes on working people, to give the “JCs” most tax cuts.

I saw a piece on the news wire yesterday, about another state legislature that is determined to give a subsidy to the rich who send their spawn to private school. The people of the state organized a petition drive to repeal the private school subsidy law, and the repeal proposal will be on the ballot this November. So the state (L&Ses) have passed a second private school subsidy law, so the rich will have their subsidy, even if the people vote to repeal the first private school subsidy law. We had the same sort of defiance of the will of the people in Michigan a few years ago: “we the people” voted to repeal the “emergency manager” law that allowed the governor to appoint someone who usurps the authority of local, elected officials. So the (L&Ses) in Lansing simply passed a new “emergency manager” law to replace it. If that other state’s private school subsidy law is the same as a similar proposal being floated by the Shinies here, it would increase the divide between public and private schools. In the Michigan proposal, there is no increase in school funding, so, to provide the subsidies to the rich, money would be taken away from the public schools, that are not all that well funded to begin with.