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Cake day: February 14th, 2025

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  • Income taxes (and also sales taxes, in most cases) disproportionately impact lower earners. Someone earning minimum wage likely devotes the majority of their income to cost of living essentials. Conversely, someone earning 10x minimum wage will spend a much lower percentage.

    The exclusion level generally is set quite a bit below minimum wages, and the a progressive tax doesn’t always fix that, as cost of living/inflation can outpace legislation very quickly.

    The other reason that it’s not entirely fair is that the wealthy don’t earn a salary. They earn dividends and do all kinds of things to avoid having an income. Someone who pulls down $1 million in salary either needs an accountant or earns an additional 10x compensation via stock grants, dividends, etc., which are (in most jurisdictions) taxed very differently than income. In the USA, for example, the top tax bracket (federal) for income is 37%, whereas a stock grant held for 1 year after vesting would be taxed at no more than 20% (and I’m grossly oversimplifying).