Corporations and the very wealthy spent years gaming the tax code and pressuring Congress to secure an outlandish goal: Pay no taxes. And it worked. But we have a chance right now to address the sickening inequities of the tax code, and raise revenue for jobs-creating infrastructure and the care economy.
“Actually, there’s been class warfare going on for the last 20 years, and my class has won. We’re the ones that have gotten our tax rates reduced dramatically.”
At some point, enough is enough. And yesterday, we reached that point, when the bombshell IRS leak from ProPublica revealed that America’s 25 richest billionaires paid only 3 percent in income tax between 2014 and 2018.
Some paid zero percent–and some even got a payout from the federal government. Jeff Bezos did not pay any income tax at all in 2007 and 2011; in 2011, he even claimed and got $4,000 in child tax credit meant for low-income families.
Warren Buffett—who has a net worth of $108 billion (with a b)–paid a tenth of one percent. The typical American family pays a 14% federal income tax rate. Buffett himself has remarked that he pays lower taxes than his secretary.
Make no mistake: the rest of us–average households and small businesses–are the ones actually footing the bill. This is just one of the reasons why inequality has been skyrocketing over the past few years, pushing more into poverty and sending a wealthy few into space.
This must stop. And there is a real opportunity to stop it this year.
The President has put forward two plans: the American Jobs Plan to invest in infrastructure and the American Families Plan to invest in the care economy, to be funded by tax increases on corporations and the rich.
Congress should adopt them.
These plans would:
- Increase the corporate tax rate.
- End tax havens abuse by multinational corporations.
- End corporate tax incentives to offshore jobs.
- Help developing countries raise more tax from multinational corporations.
- End corporate tax subsidies for fossil fuels extraction to fight climate change.
- Modestly increase the top personal income tax rate.
- End a major loophole through which the rich can pass on their fortunes to their heirs tax-free.
- Equalize the tax rates individuals pay on their investment income to the rate paid on labor income.
- Invest in the IRS to ensure the rich and big corporations pay what they owe.
These measures would go a long way in restoring equity in our tax code.
They would also take tiny steps toward chipping away at systemic inequities by race and gender. While it’s no coincidence that the top ranks are almost exclusively white men, it’s more significant that most low-paid workforces are dramatically disproportionately people of color and women. They should not be paying more for services that benefit everyone, especially corporations and the wealthiest individuals.
But we should go even further.
- The estate tax should be increased because we don’t want America to be dominated by dynastic families.
- To address the problem highlighted by the IRS leak, capital gains should be “marked to market.” That means that asset appreciation should be considered as income and taxed each year, instead of only when the asset is sold.
- Alternatively, a wealth tax should be instituted. That would help reduce the huge racial wealth gap in this country.
At the same time, the Biden plan provides relief for middle-class families, including temporarily increasing the child tax credit, permanently increasing the child and dependent tax credit, and increasing the earned-income tax credits for childless workers. These tax credits complement direct funding of the child care industry and a federal mandate for paid leave. In addition, gender discriminations (like joint filing penalizing second earners) should be taken out of the tax code.
Needless to say, these reforms are very popular. A recent poll shows that “making the rich and corporations pay their fair share” comes second only after health care among voters’ priorities, just ahead of “creating jobs.”
Many groups are mobilizing to get these plans over the hump. Never in the past decades has momentum to adopt such middle-class and family-friendly tax reforms been as high as it is today. We should not let this opportunity go to waste.