Raise the Hammer

Sorry, I should have been clearer. I meant that, overall, income from capital is taxed at lower rates than income from labour. And I was also thinking of the fact that paying (high earners) in stock options also attracts less tax than compensation in the form of salary. Note that rental income can be treated as either personal income or business income depending on the circumstances.

If you want to think of the whole tax picture, you would also need to include payroll taxes paid by businesses and workers as part of the total tax burden on labour.

And don't forget that the wealthier you are the more of your income comes in low-tax rate capital income form (which is why Mitt Romney ended up paying only 15% overall). Warren Buffett has made the same point: he pays a lower federal tax rate (17.6%) than his secretary (36%).

Because capital is more mobile than labour internationally, there has been competition to lower corporate and capital gains taxes and the trend will probably drive capital gains and corporate taxes close to zero over the next 30 years or so. As Charles Ball rightly pointed out, capital and inheritance was either not taxed or taxed at just a few percent until the mid 20th century. And they are headed to those levels again.

I thought that dividends were taxed at only 50% of your ordinary income tax rate and the top rate for capital gains is 14.5%? Those are both far lower than the equivalent marginal income tax rates. And the capital gains tax on your principal residence is a whopping 0%, which is a definite reward to the middle and upper classes who generally own their own houses.

http://business.financialpost.com/person...

"The marginal tax rate on dividends depends on your income level and province, but it’s always lower than the marginal rate on interest or employment income."

http://www.theglobeandmail.com/globe-inv...

Comment edited by kevlahan on 2015-06-09 18:53:14