It’s Tax Day, so it’s time to ask the annual question: “How big was your work penalty in 2012?”
As you may already know, investment income like dividends and capital gains is taxed at a flat 15% rate, which is lower than the rates paid by many people who work for wages. Plus, payroll taxes don’t apply to investment income, and there are a number of other advantages.
Usually, this gets described in terms of the virtues of investment: capital formation, job creation, and so on. But once upon a time, work was considered virtuous too. So I prefer to describe this situation as a work penalty. You pay more tax because you work for a living rather than watching your money work for you.
The simple version of the work penalty is not hard to figure if you have your 1040 handy, and if more people knew their work penalty, we might raise enough outrage to do away with it.
Obama’s budget has put Social Security back in the news, so the second featured article is “Three things I know about Social Security”.
In the weekly summary, everybody was also talking about Margaret Thatcher and (for some reason I can’t fathom) a country-western song.