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Capitalism in a Nutshell

Matt Levine’s newsletter Money Stuff is always excellent and usually funny. (And the poor man knows I think so.) However, this passage from the August 12th dispatch soberly explains one of the main ways the United States’ political system enforces capitalism:

“Loosely speaking, there are two main kinds of income: income from labor, like salaries, and income from capital, like dividends and capital gains. In the U.S., the former is taxed more heavily than the latter, with a top marginal rate of 39.6 percent on ordinary income, versus 20 percent on capital gains and dividends. There are a number of efficiency and fairness arguments in favor of a lower tax rate on capital gains, but there are also those who suspect that an important reason for the difference is that (1) rich people tend to get more of their income from capital than poor people do, (2) rich people tend to prefer to pay lower taxes, and (3) rich people tend to get their preferred policies enacted.”

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