← Back to Learn Investing

Why the Wealthy Pay Lower Tax Rates Than the Middle Class

Beginner Investing • 6 min

A salaried employee pays income tax on nearly 100% of their pay each year. It’s automatically withheld. Wealthy individuals see their net worth grow in a different way. They mainly benefit from unrealized capital gains. Stock and business values that increase but aren’t sold. The tax code doesn't touch these gains until a sale occurs.If you hold assets for over a year, long-term capital gains are taxed at lower…

3 of 3 free lessons used

Create a free account to keep reading

You have read your 3 free lessons. Making an account is free and gives you 3 more straight away - plus your progress, streak and quiz scores saved as you go.

Learning through your school? Join your class - school students get everything, at no personal cost.