Why American Workers Pay Twice as Much in Taxes as Wealthy Investors
&gt; Americans in the top 1 percent, and especially the top 0.1 percent, have seen their wealth and income multiply in recent decades as the rest of the country’s share of the economic pie shrank. Since 2000, a recent study found, the top 1 percent have made those gains almost entirely on income from capital, especially corporate stock—not on labor income. One reason may be the financial options of the wealthy: Business owners can lower their tax bills by paying themselves in dividends rather than in salary, for example.<p>I&#x27;ve written a few times about how the different tax rates on income, vs dividends vs interest income vs capital gains, and even business vs personal tax rates all work together to ensure the 1% come out ahead of the average income earning individual.<p>I think I was 25 when I incorporated my first corporation, not because I was a startup founder, but to reduce my taxes.  I&#x27;ll bet if you look around at the most wealthy people you know, almost all will have their own corporation or two.<p>I mean, just the fact that people pay taxes and then expense out of after tax money and corporations pay expenses and then tax on whats left should be enough to illustrate how corporations keep the rich ahead of the salaried population.<p>It can get worse as corporations can change their tax year.  This means if you are someone who gets a large bonus at the end of the calendar year you can shelter the tax on it for an entire year. So you can have someone who earns a $100,000 salary and gets a $500,000 bonus on December 31st.  The bonus goes into the corporation and has a full  year until November 30th before the tax is due.  If you invest the bonus and earn 20% by next November you have earned enough money back to cover the corporate taxes due vs the salaried employee who pays the full 40ish% tax rate on the $500,000 bonus.  Now, you&#x27;ll have to eventually pay dividends to take the money out of the company but I think I&#x27;ve shown enough to prove just how far ahead the person with the corporation comes out ahead of the average person.<p>Until the tax law changes, smart people have corporations, the 99% don&#x27;t.