Is it really fair that a wealthy investor pays 15% tax, while a doctor pays 35%?
no. But then the wealthy's capital gains could come from gains in stock or a company, and those gains have already had company tax paid on them, e.g., if a company makes a profit of $100, they'd have to pay $21 in tax, and the company's equity gain is then $79. If you then charge a 35% tax on top of the $79, then that means you've taxed the $100 profit at 56%, which is a lot higher than the normal amount. So by reducing capital gains tax to 15%, you'd end up charging only 36% in total.
It makes sense.
However, why this doesn't apply to a bank's interest payment is beyond me. So may be it is rigged...
From a matter of tax form simplicity, it is much easier--and probably better for society--just to count everything as ordinary income and tax it as such. Fewer potential for loopholes that drive your effective tax rate down to 0; easier to actually do your taxes yourself; etc.
Unless the stock option gains value (which is capital gains), no, the option itself is treated the same as if they had been paid cash.
> In general, the tax treatment for stock received as compensation for your services -- that is, stock in lieu of pay -- is the same as for regular pay. You must pay income taxes on the fair market value of the stock you received. Say an employer gave you 100 shares of stock in lieu of pay, and on the day you received the shares, the stock was trading at a price of $40. You've received the equivalent of $4,000 in income, so you'll be responsible for paying taxes on $4,000 in income. How much that tax will be depends on your tax bracket.
This is just another example of the rich getting richer, leading to the massive income inequality that is destabilizing America.
Is his though? only seems to be getting easier for the top.
Income inequality causes auction-priced goods and sevcices (much to most spending, including housing) to be bid up in price, it also creates power imbalance that can lead to more wealth extraction from the poor.
35% of $79 is $27.65. Total tax according to your example would be $21 + $27.65 = $48.65.
They were being a bit pedantic, but their math is correct.
There are several arguments for a lower long term gains rate:
- It accounts the effect of inflation. Doctors don't receive their paychecks years after they perform the work, and they expect their salaries to keep up with inflation.
- Holding assets for long periods of time imposes risk that other forms of income don't have. Doctors don't typically risk having their paycheck cut in half suddenly.
- Progressive tax rates can be particularly harsh on investors, because sales typically come in big lump sums. Doctors get nice smooth paychecks that don't suddenly move them up and down income percentiles per year.