Sharp rise in capital income benefits high income-earners almost exclusively
Record dividends no help to low income-earners
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Middle, and low-income Finns have reaped very little benefit from the sharp rise in capital gains income of the past ten years. Corporate sales profits, the stock market frenzy, and vast dividends have generally brought gains those income varies from high to very high.
According to a study by Helsingin Sanomat, the average capital income enjoyed by those earning the most doubled in 1994-2004. Capital income earned by those with medium, and low incomes declined in the same period.
The study contradicts claims, according to which wide sections of the population have benefitted from the increase in capital income.
Capital gains have increasingly concentrated in the hands of those who earn the most; last year, about 4,600 people - about one in a thousand - got one third of all capital gains income. However, that same group took in only one percent of the country's taxable earned income.
The study by Helsingin Sanomat is based on taxation figures of 1994-2004, income-earners in each year were divided into two groups - those getting more than EUR 35,000 a year, and those who making less.
Those with earned and capital income exceeding EUR 35,000 a year were seen as having high to very high incomes. Of this group, 191,000 had capital gains income in the first year under study. Last year, the number of people getting capital income in this group had more than doubled to 423,000. At the same time, the average capital income for by those in the group also increased from EUR 6,000 to EUR 13,600.
In 2000, when the stock market frenzy was at its peak, the average capital gains for those with high and top incomes actually exceeded EUR 20,000.
Capital investment also doubled among those with middle, and low incomes, with the number of ordinary Finns making personal capital investments doubling from 753,000 to 1,561,000.
However, although ordinary citizens made more capital investments than before, they have not benefitted as much from the record growth in capital gains: the average income from capital investments made by ordinary citizens has actually declined from EUR 1,750 to EUR 1,100.
The figures indicate that those with high to very high incomes have both benefitted from recent record dividends, and have been able to convert more of their income into lightly-taxed capital income.
This is reflected in the fact that the highest-paid Finns saw an increase in their taxable earned income of only ten percent, while those with medium, and low incomes saw an increase of about 30 percent in their taxed income.
Most ordinary citizens have no other way to increase their income than by earning more wages, and consequently, paying more income tax. Entrepreneurs, for their part, can keep their earnings in the company, and take it out in the form of capital income.
Helsingin Sanomat
