Where the Wealthy get their Income From
August 31, 2013
When it comes to taxing the wealthy, the focus shifts to taxing their giant salaries. A study conducted by nonpartisan Tax Policy Center has found out that the real wealth of the rich lot comes from business income and investments and hardly any money comes from compensation.
This paper drafted by Joseph Rosenberg gives a broader definition of income. This expanded cash income is inclusive of health care and retirement benefits. The results of this study point out a contrast among the 1 percent and the rest. This population in its totality takes away 64 percent of the cash income from the compensation. This is basically a pay check from any company.
Amazingly, the top 1 percent earns only around 1 percent from compensation. Its 24 percent comes from business and the rest 29 percent from investments.
Top 0.1 percent of the population relies more on investments with 35 percent of income coming from these investments. The study points to the conclusion that the richer one is, more likely is one to make money from owning or investing in a business.
Jared Bernstein of Center on Budget and Policy Priorities points out that once one gets to the top of the income scale, the two thirds of income comes from non labour sources. This however does not mean that the wealth lot just lives off their passive income or if they are not putting in enough efforts. On the contrary, business owners work extra enough and make much efforts than other employees.
Robert Williams of Tax Policy Centre points out that small business owners work 24 by 7 and put in more efforts than an average worker. Economist, Emmanuel Saez of University of California at Berkeley points out that the rising income of the wealthy lot is due to growth in wages and salary income and this trend has been in place since 1970’s.