> Separating out payroll vs income taxes -- in other words recognizing the different tax rates for "earned" vs. "unearned" income -- is not entirely irrelevant, because dollar for dollar your capital gains taxes will be spent more on defense than welfare, but it's still no where near 50% of your capital gains taxes being spent on defense.
So that's not entirely how income vs payroll taxes work.
If you get a paycheck, out comes taxes for social security and Medicare. There is an annual limit on how much of your income is taxed for social security, whereas there is no limit for Medicare, and there's a bump in the Medicare rate after a very high dollar amount (near $250k/year if I recall). For our argument, none of the above is refundable (if you pay too much social security tax because of multiple W2 employers, the extra tax gets applied to your federal income liability).
For income tax, lots of people pay through their paycheck, although if you're below a certain yearly income threshold, federal income tax is not withheld (you even get a refundable tax credit for working if you're poor enough). Also, as you mentioned, capital gains taxes also are federal income tax revenue. So, income tax is not unearned income alone.
So that's not entirely how income vs payroll taxes work.
If you get a paycheck, out comes taxes for social security and Medicare. There is an annual limit on how much of your income is taxed for social security, whereas there is no limit for Medicare, and there's a bump in the Medicare rate after a very high dollar amount (near $250k/year if I recall). For our argument, none of the above is refundable (if you pay too much social security tax because of multiple W2 employers, the extra tax gets applied to your federal income liability).
For income tax, lots of people pay through their paycheck, although if you're below a certain yearly income threshold, federal income tax is not withheld (you even get a refundable tax credit for working if you're poor enough). Also, as you mentioned, capital gains taxes also are federal income tax revenue. So, income tax is not unearned income alone.