A widely cited measure showing capital claiming nearly half of America's income significantly overstates the reality, according to a new analysis from the Tax Foundation published this week. The report challenges headlines asserting workers' share of national income has fallen to record lows, arguing that capital's actual slice of income ranges between 17 and 24 percent—far below the 47 percent suggested by the Bureau of Labor Statistics series. The discrepancy stems from counting depreciation, taxes, and other non-income items as capital earnings, the analysis concludes.
In the second quarter of 2026, gross domestic income totaled approximately $32.2 trillion at an annual rate, the report finds. Workers received 50.4 cents of every dollar as compensation: 41.5 cents in wages and salaries plus 8.9 cents in benefits. Income clearly paid to capital—corporate profits after corporate tax, interest, and rents—amounted to nearly 17 cents per dollar, including about 3.6 cents of "imputed rent" (an estimate of what homeowners would pay to rent their own homes). Another 6.7 cents represented income from proprietorships and partnerships, a blend of owner labor and investment returns. Even if this entire proprietor share is assigned to capital, capital would earn just 24 cents per dollar of gross income. The remaining categories include depreciation (nearly 17 cents), which covers the cost of replacing worn-out buildings and equipment, and taxes collected before income reaches households: 7.0 cents in taxes on production and imports plus 2.8 cents in corporate income taxes.
When measured against net income—the roughly $23.7 trillion of private sector income actually paid to people in the second quarter of 2026—the labor share tells a different story, the authors write. Unambiguous labor income stood at about 69 percent of net income in the late 1940s, climbed to approximately 75 percent in the 1970s, and registers at 68.3 percent today. Unambiguous capital income has risen from roughly 13 percent of net income in the late 1940s to 22.6 percent currently. More than half of that increase has occurred since 2000, when it measured 17 percent, with the sharpest jump coming during the pandemic years of 2020 and 2021. The ambiguous proprietors' slice dropped from about 18 percent of net income in the 1940s to around 10 percent by 1970, driven largely by farming's decline, before stabilizing at 9 to 10 percent in recent decades, most recently at 9.1 percent.
The report explains that the BLS measure creates a misleading trend by using a time-varying allocation to split noncorporate business income between labor and capital. BLS assumes proprietors "pay themselves" the average hourly compensation of employees in their sector multiplied by their hours, treating the remainder as capital income. Because this comparison pits proprietor earnings against employee averages, the inferred capital share of proprietors' income has surged from less than a fifth in 1990 to approximately half today. The BLS ratio also excludes government and nonprofits (roughly 15 percent of the economy), which would raise the estimated labor share if included, and divides income-side compensation by product-side output, allowing bookkeeping gaps to affect the trend. By contrast, the national accounts approach keeps all income under one fixed convention, ensuring components sum to total income. The analysis notes that using gross income to attribute non-labor earnings to capital creates the odd position of counting every dollar of tariff revenue as "capital income," even though no common interpretation of tariff incidence considers it such.
The report concludes that descriptions of the labor share as "unprecedented," "record low," or nearing a "50-50 split" are misleading. The labor share has made a round trip over the postwar era—rising, then falling—rather than declining consistently from its starting level, returning to historically precedented levels instead of reaching "never-before seen" lows. Capital's share of net income sits between 22.6 percent and 31.7 percent depending on how proprietors' income is treated, and recent research suggests proprietor income is mostly labor, meaning even the 31.7 percent estimate is likely too high. The bottom line: labor isn't losing the income battle the headlines suggest.