The Tax Foundation is a nonpartisan nonprofit think tank that seeks to educate taxpayers about the U.S. tax system. They recently released a report on the Differential Taxation of Wages and Investments which found that commission income is taxed at a higher rate than wages.
According to the Tax Foundation “The tax code imposes a higher tax rate on investment income than on wages and the tax burden falls more heavily on investment income than on wages as a share of total income.” The report found that the top marginal tax rate on wages is 39.6 percent while the top marginal tax rate on investment income is 20 percent.
The report also found that the tax code is biased against investment income in other ways. For example the tax code allows for deductions and other preferences that are not available to wage earners. This preferential treatment of investment income results in a lower overall tax burden on investment income than on wages.
The Tax Foundation’s report is based on data from the Internal Revenue Service (IRS). The IRS data shows that in 2013 the top marginal tax rate on wage income was 39.6 percent while the top marginal tax rate on investment income was 20 percent. The report also found that in 2013 the average tax rate on wage income was 33.7 percent while the average tax rate on investment income was 23.8 percent.
The report concludes that “the tax code’s bias against investment income is clear.” The difference in tax rates between wage income and investment income “results in a tax system that is less efficient creates greater complexity and imposes a heavier burden on investment than on wage income.”
Is commission taxed at a higher rate?
No commission is not taxed at a higher rate.
