In my previous blog post on Brucenomics, I traced the history of the terms “earned income and “unearned income” back to Karl Marx’ infamous book, Das Kapital. Was it coincidence that the U.S. Internal Revenue Service (IRS) chose those two terms to use in its federal tax system back in the early 20th century? I think not!
In this post I’ll discuss how the U.S. Internal Revenue Service and other government agencies use these terms to ensure that most Americans will find it difficult if not impossible to get out of lower and middle income levels to achieve their “American Dreams”.
The IRS continues to provide the wealthy with with largess and leaves wage earners, retirees, and minorities behind in the dust when it comes to their efforts to build wealth. In my next post I’ll show how the IRS does this. But first let’s look at who is impacted by these IRS lables.
Who Earns What Kinds of Income?
I define Marx’s two categories of income as used by the IRS this way:
- Earned Income is what workers get from their labor (“the sweat of their brow”).
- Unearned income is what capitalists (a.k.a., investors and inheriters) get from their corporate and real estate incomes.
The IRS framework for federal taxpayers rests upon this hierarchy of these two types of incomes. They split Americans into groups based on types of income we make and the amounts of income we make.
This use of a hierarchical framework of privileged and less privileged individuals instantly creates discrimination against many groups of Americans. Also importantly, it fosters the growing income inequality found within our government—in favor of investors over workers.
Moreover, it isn’t just the IRS that differentiates Americans based on how much money we make and how we make it. Discrimination against minority groups and the poor and middle classes can be found in many of our federal and local government agencies as well.
For example, the title of the so-called “Small Business Administration” is a joke. That agency has evolved to give preferential treament to funding multimillion dollar corporations, like Microsoft, Apple and Chipotle by linking them with hedge fund funders—not to aid to truly small businesses on Main Street.
Bias exists in the EPA too which lets loose toxic chemicals in poorer neighborhoods, and in banks’ redlining for mortgages. Many other agencies throughout our government too. And it’s really obvious when it comes to retirees!