PAYCHECK + PAYROLL TAX
Not only do workers pay higher income tax rates, their earnings are also subject to payroll tax. “Earned income from labor is taxed as high as 37 percent, depending on your tax bracket, and then workers also have to pay 7.65 percent towards Social Security and Medicare,” says Lyn Alden, founder of Lyn Alden Investment Strategy. “Qualified dividends and long-term capital gains, on the other hand, are taxed at a maximum rate of 20 percent for shares of stock, and they are not taxed any money towards Social Security and Medicare.”
