Income From Capital Taxed At Lower Rates Than Income from Labor–Major Form of Investment Income for Rich Never Taxed At All

U.S. tax law favors wealth over workers by taxing capital income (income from investments) at lower rates than income from labor (wages and salaries); failing to tax at all the main form of income for the super-rich; and encouraging corporate offshoring. This privileging of money made from money over money made from work widens the nation’s destabilizing income and wealth gaps; forgoes hundreds of billions of dollars in potential tax revenue from the wealthy; and disrespects the honest labor of American workers. 

• The top tax rate on the two biggest forms of taxable income from wealth is little more than half the top rate on labor income.  The top tax rate on long-term capital gains (the profit from selling an investment held over a year) and dividends (periodic payouts to corporate shareholders) is 20%. The top tax rate on the income from labor (and other forms of income, such as interest) is 37%. That means an emergency room doctor working all night to save lives could face a tax bill nearly twice as high as a Wall Street investor whose only job is to check stock prices on his phone. 

• The biggest source of income for the super-rich–the increase in value of investments they don’t sell–is never taxed at all. Billionaires and other members of the hyper- wealthy class rarely draw a paycheck: their main source of income is the rising value of their stocks, real estate and other investments they don’t sell. But they don’t need to sell to benefit. At those upper levels of wealth, they can obtain low-cost loans against their rising portfolios and live tax free. Whatever interest they pay on the loans is tiny compared to the tax they would owe if they sold their winning investments. And when those market gains are passed along to the next generation, they disappear for tax purposes. This tax-avoidance strategy is called “Buy, Borrow, Die”.
  
• Working Families Pay Four Times More In Taxes Than Billionaires: As a share of wealth rather than income, the average American pays an effective tax rate of 5.6% in combined federal, state and local taxes  while the top 400 wealthiest individuals pay an effective rate of just 1.3%. 
• Taxation of huge inheritances has completely broken down. People lucky enough to be born extraordinarily rich are getting bigger and bigger inheritances because the estate tax–which is supposed to tax intergenerational wealth transfers of the very wealthy–has been intentionally weakened and is full of loopholes. The estate tax only applies to family fortunes greater than $30 million and impacts almost no family farms or small businesses. 
• Corporations get lots of tax breaks, none of which help working people. The richest 10% of households own 93% of all publicly traded stock, meaning they get the benefit when corporate taxes are cut. The recently enacted Trump-GOP tax-and-spending plan handed corporations three big tax breaks that together will cost almost $600 billion in lost tax revenue, money that goes straight into the pockets of wealthy shareholders. 
• The tax code encourages offshoring of jobs. The tax code promotes the offshoring of jobs by taxing the foreign profits of U.S. corporations at a lower tax rate than the tax rate on domestic earnings. This lower rate was set to expire, but was extended (with some modification) by the 2025 Trump-GOP budget.