I finally did my taxes last night. The good news is that I made a lot of money last year, at least by my standards. Not enough for a 3-bedroom house in the Bay Area -- let's not get crazy -- but still, quite a bit.
The bad news is that I made it all by working at a job. That means the Feds tax most of my income at 28%...
If only I had earned my money in some more socially beneficial way -- for example by sitting on my ass all year collecting dividends on my investments (dividend income, taxed at 15%) or speculating in real estate (long-term capital gain, taxed at 15%) -- even just watching the value of my vacation house increase -- my tax bill would have been cut nearly in half!
Welcome to the work penalty. Under current tax codes, the WORST way to make money is the old-fashioned way -- to work a job and earn it. The best? Well, real-estate speculation is pretty high on the list (which may explain why I can't afford that 3-bedroom house), as is anything else that involves sitting on your rear consulting CNBC several times a day.
Why not split the difference? THERE's a middle-class tax-break I could live with. Let's equalize the tax rates. Keep it revenue-neutral, but drop the regular rate to, say, 22%, and raise the long-term capital-gains rate to the same rate.
End the work penalty. Equal taxes on equal income!