He's 28, a software engineer in Denver, pulling $140,000 a year. After federal income tax, Colorado state tax, and payroll deductions, he takes home around $95,000. He works 50-hour weeks. He's good at his job. He pays more in taxes than his landlord, who owns the building outright and collects $18,000 a month in rent while doing approximately nothing.

This isn't a bug. It's the architecture.

The United States taxes labor at nearly double the rate it taxes wealth. If you earn your income through effort, discipline, and time, you face a top marginal rate of 37% plus payroll taxes. If you earn your income by owning assets that appreciate while you sleep, you pay a maximum of 20% on long-term capital gains. In practice, the effective rate for the ultrawealthy is often below 10% due to deferred gains, stepped-up basis, and the machinery of trusts.

The people who designed this system overwhelmingly earn from capital, not wages. The code reflects their worldview.

How We Got Here

The preferential treatment for capital gains wasn't an accident. It was policy, sold as economic stimulus.

In 1978, Congress passed the Steiger Amendment, slashing the top capital gains rate from 49% to 28%. The pitch: lower taxes on investment would spur job creation, business formation, and economic growth. Every subsequent reform (1981, 1997, 2003) kept the same logic. Capital should be "rewarded" because capital supposedly drives innovation.

Meanwhile, the burden on labor quietly climbed. Payroll taxes expanded. Wage earners became the reliable revenue stream. The assumption hardened into dogma: workers are a stable, unlimited tax base; capital is a fragile engine that must be coddled.

The rationale rested on three claims:

1. Lower capital taxes would increase productive investment.
2. Higher returns on investment would translate into higher wages.
3. Preferential treatment would encourage risk-taking and entrepreneurship.

Each of these claims has been disproven by the last 40 years.

Corporate investment as a share of GDP has been largely flat since the early 1980s. Labor's share of national income has fallen from roughly 65% to 58%. Wages have decoupled from productivity for the first time in modern U.S. history. The largest beneficiaries of low capital taxes have been passive investors, not entrepreneurs.

The policy was sold as pro-growth. It evolved into a wealth-preservation mechanism.

The Generational Chokehold

Federal Reserve data shows the distribution clearly:

Meanwhile, real wages for young men are lower today than in the 1970s, adjusted for inflation. Asset prices have grown 3-5x faster than median wages over the last two decades.

This is the tax architecture younger Americans inherit: the thing they rely on (labor) is heavily taxed, and the thing they don't yet have access to (capital) is lightly taxed.

A 25-year-old making $120,000 in tech feels poorer than a similar worker in the 1990s because his after-tax income is chewed up by a tax code built around someone else's financial life.

The Behavioral Distortion

The tax code doesn't just redistribute wealth. It reshapes behavior.

High-earning individuals contort their financial lives into asset-driven income: LLCs, distributions, options, equity, real-estate depreciation, QSBS exclusions, term loans drawn against stock portfolios. Labor income becomes something you escape, not something you earn with pride.

This is rational. If you're punished for earning wages and rewarded for holding assets, you optimize accordingly.

The result: younger Americans aggressively chase equity compensation, entrepreneurship, and alternative asset plays. Not out of greed, but out of survival. You cannot wage-earn your way into asset-based prosperity if the code punishes wages and subsidizes ownership.

The Cultural Signal

A society's tax code is a moral document. Ours signals a hierarchy of value:

Effort is cost. Ownership is virtue. Time is taxable. Compounding is sacred.

If you're young, that message shapes your life decisions. You optimize for equity, not salary. You take on riskier debt to access assets faster. You deprioritize W-2 stability because the tax code treats stability as a penalty. You invest aggressively because you're punished for earning and rewarded for holding.

The system forces the young into financial engineering simply to stand still.

Who Benefits

The winners are plain:

• Ultra-wealthy asset holders
• Private equity and hedge fund managers (carried interest loophole)
• Real estate investors (depreciation + 1031 exchanges)
• Retirees living off tax-advantaged asset flows
• Corporations executing buybacks instead of raising wages

In short: people who already own enough capital that their primary "income" is appreciation, not work.

Everyone else subsidizes them.

The Math

Taxing sweat more than wealth is backwards for a simple reason: effort doesn't compound. Wealth does.

Penalize the thing that doesn't compound, subsidize the thing that does, and the result is mathematically guaranteed: rising inequality, generational stagnation, and a permanent class divide between owners and workers.

Young Americans aren't "lazy." They're rational actors trapped in an irrational structure.

The outrage isn't emotional. It's arithmetic. Tax the thing people need to live (work) more than the thing people need to get rich (assets), and you will end up with exactly the society we have: financially stratified, asset-inflated, and structurally hostile to mobility.

It's outrageous because it didn't have to be this way. It's outrageous because it punishes the only input you can't compound: human time.

But above all, it's outrageous because everyone knows who benefits.

And it isn't the person earning a paycheck.