I think people who read this blog would agree that I follow U.S. public finance issues pretty closely, including those related to taxation. But I recently found out something I had never heard of before, that was never publicly debated in any news source I follow, that no “progressive” politician has objected to as far as I know, and frankly I’m shocked.
In a country with a median household income of less than $62,000, you can get more than $100,000 a year while not working and pay no federal tax at all, because $80,000 in investment income (dividends and capital gains) is tax exempt! Even as work income for the less well off is taxed twice, by the payroll tax, and the income tax. It turns out that for married couples, while other income might be taxable if it is higher, that $80,000 in investment income is fully exempt from taxes even if total income is as high as $184,250 — with other deals up to $200,000.
How could this possibly be thought of as fair? After all, a working couple with half that income from work would pay $7,500 in payroll taxes (or $15,000 if they were “gig” workers) and federal income taxes – at a higher rate – on top of that. Why hasn’t a single pundit or politician raised a loud objection?