In the US, most people make their money from a regular job; they get a paycheck and pay income taxes. But the richest Americans, the top 1 percent, make most of their money from things like investments in real estate or the stock market. Those investments are taxed as capital gains. While federal income tax has a maximum tax rate of 37 percent, the tax rate for capital gains tops out at just 20 percent.
It’s not even a majority is capital income, let alone capital gains.
For the top 1 percent of households, in contrast, capital income — most of which enjoys preferential tax rates — constitutes 41 percent of their taxable incomes,
Capital income is not the same as capital gains. Further:
According to the Congressional Budget Office, as of 2011, the top 1 percent of income earners in the U.S. get more than a third of their income from capital gains. For context, the typical annual income for those in the top 1 percent is about $1.4 million.