ITs very simple, the rich make their income from Capital Gains! 50% of their income comes from Capital Gains!!!! So it makes sense as to why the fed would continue to keep zero interest rates and keep markets propped up, the elite in this country make 50% of their income from capital gains, so 99% of the US is lucky to make .025% on their savings thanks to the fed and their zero policy interest rates while the 1% and the rest of top earners make most of their money from stock market gains....so thats why yellen and the fed continue to bow to wall street and remain extremely dovish, they will keep rates at historical lows to keep feeding wall street what it wants, any talk about raising rates is all garbage talk, there are no rate hikes coming. yellen and friends will keep pumping the market with zero rates and keep the bubble growing like they have the last 20 years! Where the rich make their income Robert Frank | @robtfrank 54 Mins AgoCNBC.com What's the secret to making money like the rich? Capital gains. A study from the non-partisan Tax Policy Center looked at the sources of income for American taxpayers of different income levels. It found that the higher you go up the income ladder, the greater share of income comes from capital gains. Dimas Ardian | Bloomberg | Getty Images For the 99 percent of taxpayers making less than $500,000, salaries and wages account for 75 percent of their adjusted gross income for 2012, the latest period available from Internal Revenue Service returns. Of the remaining income, about half came from retirement programs such as pensions, annuities and Individual Retirement Accounts. For taxpayers making $500,000 to $1 million, salaries and wages account for more than half of earnings. Read MoreHow much these CEOs earn in an HOUR But for those making $10 million or more, salaries and wages only account for around 15 percent of their income. Their real money comes from capital gains, with capital gains accounting for about half of their earnings. Another 15 percent to 20 percent came from interest and dividends. About 25 percent of their income came from business income, which means they owned or held a stake in a private company. It's no surprise that the really rich make their money from, well, money. But Roberton Williams of the Tax Policy Center said the data doesn't mean that all of the wealthy are just sitting around making millions from the stock market every year. Many of the people in that $10 million-or-more group don't repeat their mega-earnings every year. Their income came from a one-time sale of a business or asset, leading to a capital gain. Read MoreStates with the most multimillionaires "A lot of the people at the very top are there because they sold a major asset or business they've built for years," he said. "It's a one-time big payday." Williams said one of his previous studies found that among those in the top 1 percent, about half were only in the 1 percent for one year over the course of a decade. From a policy perspective, Williams said the importance of capital gains to the wealthy could be seen in two ways. Some have argued for hiking the capital gains tax from its current federal rate of 20 percent (plus 3.8 percent for top earners under the Affordable Care Act's Net Investment Income tax). This includes President Barack Obama, who proposed raising the rate to 24.2 percent in his 2015 budget. The argument is that because the capital gains rate is lower than the income tax on salaries and wages, the very rich sometimes pay lower rates than everyday earners. (Remember Warren Buffett and his secretary.) Read MoreMore millionaires than ever are living in the US "It looks like a ripe area to tax," Williams said. But, capital gains are also voluntary: Owners can choose when to sell their business or asset depending on the optimal tax environment. That's why the incomes of the wealthy can be so volatile. If capital gains were to increase, the rich could simply sell their assets and take the gain before the tax increase, therefore leading to lower revenue from the capital gains tax. "The higher you make the tax, the more people will resist it," he said. "We know from history that people respond to capital-gains tax rates."
There is nothing here that isn't obvious to the least competent observer. We tax capital gains at a lower rate. That favors people with capital. Why do you think all the wealth is concentrated at the top end? Because the top end has most of the capital. How do you think we got there? Because we virtually eliminated progressiveness in the income tax during the 1980s, and its been only partially restored since.. If you don't like that, let it be reflected in your vote.
It's hard to answer the question as to why wealth is concentrated at the top end. Maybe because it's definitional? How could wealth be concentrated at the bottom end?
Maybe we should talk a little bit about why the tax code favors people with capital. Could they be the ones growing the businesses, creating the jobs, taking the risks? If I receive no reward for taking a risk other than paying higher taxes, I would take no risks, and there would be no jobs, and no companies because I would not buy any stock. Maybe we should also talk about how all these people became well off. Many (most) were not born that way. At some point, to accumulate wealth, you have to live below your means and invest the excess. Eventually, by chipping away at that for 20 years plus, you may find that you have become one of the people whose capital gains exceeds their income. That is what some of us have done for the last 20 or 30 years, step by step, instead of bitching about what other people have that we don't have. While I agree that in the interest of fairness, people with wealth should probably pay a larger share of taxes, my point here is that there is nothing inherently evil about being rich. In the US, wealth is available to anyone of sound mind and body who wants to concentrate on acquiring it, beginning in their youth. It requires sacrifices.
Inequality is a part of nature, with or without tax, not sure why people complain about the 1% etc. What I do not like is government backed monopolies, that is of benefit to noone. If you get to the top by outplaying competitors thats fair game, you are delivering a better service. Tax is simply wealth redistribution. But you are misguided if you think that tax money is the wealthy giving to the less wealthy.
There's no doubt that business owners don't get enough credit for the risks they take. Risk should equal reward. But here is what I don't get. I have a job and get paid from my employer but I also get paid a 1099 for the same job from another source. The 1099 makes up about 40% of my income. On that money I have to pay about 46% tax. That's 25% federal, 13% self employment, and 8% state tax. Now, I don't even make close to $100k a year. Why in the world do I have to pay 46% in taxes and the rich guy who buys stocks that are then inflated by the Fed gets to pay 20%? While I agree that most people were not born into wealth, I do believe that those 50+ had much easier opportunities. How many times have we heard how the trading, education, gambling, business etc opportunities were so much better in years past? Now it seems the ones staying ahead now are just using the resources gained in the past. I love it when the 50+ crowd complains about the lazy people working at Wal-Mart and how they should live in poverty cause they don't have real jobs. Then they turn around and pay for their kids education, cars, health care, housing etc while they work jobs that don't pay much. What's the real difference between their kids and the people at Wal-Mart? A big chuck is who their parents are. Give every person at Wal-Mart a free college education like you gave your kid and let's see how they turn out.