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A new study finds that the increase in income inequality has more to do with a different group of earners (not necessarily idle millionaires): America's “working rich," according to a report co-authored by Princeton University.
Entrepreneurs and highly skilled professionals operating businesses prevail among the top 0.01%. These "working rich," which include lawyers, physicians, financial professionals, auto dealers, and beverage distributors, receive most of their income from human capital, the study reveals.
Incomes - Years - Findings - Co-author - Owen
“We set out to understand what has been driving top incomes in recent years, and that upended some previous findings about the rich,” says co-author Owen Zidar, assistant professor of economics at Princeton University’s Woodrow Wilson School of Public and International Affairs, in a release. “People are earning a lot of dollars through private businesses, and that’s important evidence that should influence the debate around taxing millionaires.'”
Zidar co-authored the report with Matthew Smith of the U.S. Department of the Treasury; Danny Yagan of the University of California, Berkeley; and Eric Zwick of the University of Chicago Booth School of Business.
Team - Firms - Tax - Reform - Majority
The team examined more than 11 million firms between 2001 and 2014, before the 2017 Tax Reform was passed, and found the vast majority of the top income comes from “pass-through” businesses wherein profits and losses are passed through the operators themselves. Essentially, the top .01% are not paying corporate and dividend taxes around 50 to 55%, but instead pay 11.6% or less.
The new findings provide valuable insight into the secret world of entrepreneurs whose human capital income is critical for understanding top incomes. Researchers specify the need for a more harmonized business tax system, more highly skilled professionals, and the need to modernize the educational system to produce more innovators and entrepreneurs.
Researchers - Evolution - % - Tax - Reforms
Researchers explained the evolution of the top .01%: Reagan-era tax reforms increased tax liabilities for businesses and reduced them...
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