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Originally Posted by pdurrant
Exactly so. There is an economic and legal definition of unearned income. Basically, unearned income is income that you get without having to expend further effort. Earned income is income where one must do work for the income to continue, i.e. do some kind of job and get a salary.
It's not a term related to morals.
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In the US, there are three different types of income that are taxed at different rates - ordinary income, short term capital gains and long-term capital gains. Short term capital gains is gains on capital assets held for a year or less, while long term capital gains is gains on capital assets held for longer than a year. Short term capital gains is taxed at the same rate as ordinary income, while long term capital gains is taxed at a lower rater. US law does not make a distinction between wages and salaries, interest, dividends, rents, royalties and short term capital gains, all are taxed at the same rate.
The idea of earned verses unearned, is of course, a judgmental notion. It dates back to the early Judeo-Christian scriptures where you were not allowed to charge interest on money. I would point to Niall Ferguson's The Ascent of Money for a full description. For the most part, it is an idea that has fallen on disfavor, given the large percentage of people (in the US, at least) who are now members of the investment class as more and more people move towards 401-K and IRA retirement account rather than pension plans. It is still popular in certain political philosophies.