The tax code taxes investment income at a lower rate than wage income

Evidence

Stocks and bonds have long been disproportionately held by the wealthiest white Americans, and a whole section of the tax code was developed when one man from a prominent family sued to avoid taxes on a bond sale. As we learned in chapter 4, stocks held inside of a retirement account, like a 401(k), are generally not taxed until an employee retires, withdraws an amount, or turns seventy-two. Stock investments outside of a retirement account, however—referred to as “capital assets”—receive very different treatment. If you buy stock and then sell it at a loss, you can take a tax deduction, which can be used to offset other gains or income. If you sell stock at a gain, you pay taxes on the income—but at the capital gains rate, which is different, and significantly lower, than the one that applies to wage income. — Dorothy A. Brown, The Whiteness of Wealth, 435

Categorization

• DEFINE: Defines capital assets and the capital gains rate as distinct from the wage/income tax treatment.
• ADDENDUM: Could support a follow-up connecting tax preference for assets to the ‘grafting and growth on trees as infrastructure’ plant-themed piece’s parallel about how favored assets compound advantages over time.
• XREF: connects to: US tax law historically favored capital gains over dividend income for investors — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 185; U.S. tax law favored index-futures arbitrage with low long-term-capital-gain rates. — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 1571