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 why Warren Buffett, one of the richest people in America, has often said that he pays a lower tax rate than his secretary.
President Biden has a plan to raise that maximum tax rate from 20 percent to 39.6 percent, and proponents see that as one way to tax the rich.
But Buffett and other billionaires still won’t have most of their wealth taxed. Watch the video above to learn about how the richest people in the US avoid paying taxes.
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