>>>>Because federal income tax is based on income, not wealth.
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>>Does this definition of income include "capital gain" which is a major/main source of additional wealth for the already wealthy and is taxed at only 15%? Some of the richest people I know don't bother to pay themselves any income at all these days.
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>Capital Gain - An increase in the value of a capital asset (investment or real estate) that gives it a higher worth than the purchase price. The gain is not realized until the asset is sold. A capital gain may be short term (one year or less) or long term (more than one year) and must be claimed on income taxes.
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>As I understand it, long term capital gains have a specific lower tax rate, but short term capital gains are taxed as income.
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That is correct. The rate on long term gains is 15%.