7.5b Help at the Top

Higher-income and wealthy households also receive government benefits, typically in the form of tax savings, such as through capital gains tax exemptions. The wealthy earn a larger share of their income as capital income rather than labor income (Marr et al., 2019). Labor income consists of wages and salary earned through work. It is the primary source of income for everyone else and is taxed at higher rates than capital income. Capital income refers to the income or profits earned from selling an investment or asset, such as stock or real estate. Depending on the asset, there may be little to no taxes on that income at all.

Photo 7.17

Wealthier Households Receive Government Benefits Through Tax Savings, Such as Those from Real Estate Investment