WASHINGTON—Progressives are shocked that House Democrats opted yesterday for taxes on income rather than billionaire fortunes to pay for their $3.5 trillion social policy and climate change package. Democrats, because of pressure from their own so-called moderates, went for a plan that taxes only official income earned by people making over certain amounts and on the officially declared income of corporations. The plan put forward by the House Ways and Means Committee leaves people like Jeff Bezos of Amazon untouched.
Many billionaires have no “income” at all but have billions of dollars in accumulated wealth that the plan put forward yesterday by the House Ways and Means Committee avoids taxing. Under the plan, billionaires can continue to pass on every penny of their obscene wealth to their children or anyone else and pay absolutely no tax on the transaction.
Instead of going after that wealth, Dems settled, in addition to tax hikes on income, for moves like increasing the number of IRS agents to collect more of the unpaid taxes that salaried people have not paid.
The House Ways and Means plan to pay for programs in the $3.5 trillion “reconciliation” package should tax the wealth of the rich, not just their income, Sen. Elizabeth Warren, D-Mass., declared today.
In agreement are Sens. Bernie Sanders, Ind-Vt., and Ed Markey, D-Mass., and Rep. Ilhan Omar, DFL-Minn. And a number of progressive interest groups, including the Institute for Policy Studies, and a member of the Patriotic Millionaires, agree with Warren.
“I don’t want to add to my personal net worth at the expense of my fellow Americans. I can pay more, I should pay more, and I reject the false concept that we wealthy Americans are the job creators who will leave the country with our money if we’re asked to pay our fair share,” said Patriotic Millionaire, and investor, Karen Stewart.
“For decades, a small group of families has raked in a massive amount of the wealth American workers have produced, while America’s middle class has been hollowed out,” Warren said when introducing the wealth tax in 2017. “The result is an extreme concentration of wealth not seen in any other leading economy.”
Her plan: Hit people with a net worth of more than $7.3 million with the 2% wealth tax. If they’re worth more than $1 billion—like Bezos—the tax rises to 3%.
The backdrop to Warren’s proposal is the tax-writing House Ways and Means Committee’s plan released yesterday to raise income taxes on the rich, contrasted with the wealth gains, not just the income gains, those rich have accumulated, especially since the coronavirus pandemic hit.
Those riches are extensive. A joint study by the Institute for Policy Studies and Americans for Tax Fairness reported the total combined wealth of U.S. billionaires increased from $2.9 trillion on March 18, 2020—the pandemic’s start–to $4.7 trillion on July 9, 2021.
That’s one-third of the billionaires’ overall wealth gains over the last 31 years, Chuck Collins of the Institute for Policy Studies (IPS) reported.
Taxing that wealth would pay for expanding the child care tax credit, increasing daycare, raising the pay of daycare workers, having Medicare cover vision, dental, and hearing care, and investing in “green” infrastructure and jobs, including more money for public transit, and rehabbing and updating dilapidated and outdated schools.
“This rise in billionaire riches alone” of $1.8 billion since the pandemic began “could almost entirely pay for President Biden’s proposed family investment plan,” said Collins.
All in the package
All those plans, and more, of Biden’s Build Back Better agenda, are expected to be in the reconciliation-driven package lawmakers will consider between now and the end of September. But reconciliation rules also require paying for them. Which is where Ways and Means’ “tax the rich” income tax hikes come in—and so does Warren’s “tax their wealth” plan.
In the past, lawmakers, particularly Republicans, have argued that their legislation, including the tax cuts for the wealthy that they did under Trump, eventually pay for themselves by trickling down to everyone else. Those claims, of course, were false. But the $3.5 trillion infrastructure plan backed by Biden and the Democrats will indeed pay for itself because of the millions of jobs and boost to the economy it will provide.
Ways and Means would raise the corporate income tax rate from its current 21% to a new 26.5% rate, raise the top capital gains rate from its current 20% to a new 25% and raise the top individual income tax rate from 37% percent to 39.6%, plus a 3% surtax on individuals’ income above $5 million.
It’s not enough, though, for the Institute for Policy Studies. Or for Warren. Or Sanders, Markey, and Omar, who unveiled their tax-the-wealth plan last October. It went nowhere in Congress.
“It’s time to start taxing wealth, not just income,” Warren said in a recent Washington Post op-ed. “When Jeff Bezos takes a joyride to space, he isn’t paying for it with his declared income of $80,000.
“Bezos and lots of other billionaires gamed the system so they have plenty of spending money and close to zero tax obligations. The best option to stop that is a two-cent wealth tax that applies only to the wealthiest 100,000 U.S. households—with a few cents more for the billionaires. Such a wealth tax would raise roughly $3 trillion in revenue over the next decade, without raising taxes on 99.95% of Americans.”
The Ways and Means Democrats’ tax hikes “move the ball forward but doesn’t meet the scale of the moment,” IPS’s Collins and Rebekah Entralgo e-mailed. “The House tax reforms would raise an estimated $2.2 trillion, just barely more than the revenue lost to the 2017 Republican tax cuts. Under this initial House plan, the rich would pay a higher rate on ordinary income, but billionaires like Jeff Bezos who make most of their money off investments wouldn’t owe the IRS much more.”
Sanders said the legislation he introduced, with Markey, Omar, and Sen. Kirsten Gillibrand, D-N.Y., last year “will tax the obscene wealth gains billionaires have made during this extraordinary crisis to guarantee healthcare as a right to all for an entire year.
“At a time of enormous economic pain and suffering, we have a fundamental choice to make. We can continue to allow the very rich to get much richer while everyone else gets poorer and poorer. Or we can tax the winnings a handful of billionaires made during the pandemic to improve the health and well-being of tens of millions of Americans.”
Sanders also favors a 77% tax rate on estates worth more than $1 billion. That rate would prevent the richest from passing most of their wealth down to their heirs.
A shameful profit
“It is shameful billionaires profit off the suffering of working families as the pandemic ravages the economy and kills thousands every day,” Omar said last year. “For far too long, the richest 0.001% have avoided paying their fair share in taxes. This bill will go a long way towards addressing our nation’s massive wealth inequality and finally guaranteeing healthcare as a human right. Nothing could be more important in the midst of a global pandemic.”
Collins cited a ProPublica report on billionaire wealth, and how they escape taxes on it. It showed 25 top billionaires paid on average only a 3.4% federal income tax rate on the growth in their wealth income—dividends, capital gains, interest, stock options, and the like. At least two, Amazon founder CEO Jeff Bezos, with a net worth of $212 billion, and Tesla’s Elon Musk ($163 billion) “went multiple recent years paying zero federal income,” IPS’s Collins added.
“Because of gaping loopholes in the tax code, increased wealth like that enjoyed by America’s billionaires and the richest 1% can go untaxed forever, and even when it is taxed the rate is about half that of wage income. President Biden would end those special breaks for millionaires and billionaires as part of his plan to tax wealth and not just work.”
Then Collins cites some of the tax hikes in the Ways and Means plan: Raising the corporate income tax rate and the capital gains tax rate, curbing offshore corporate tax dodging, a 50% tax increase on foreign profits of U.S. multinationals, and Biden’s plan to tax firms that deliberately shift their “headquarters”—and their profits—to overseas tax havens to escape U.S. taxes.
Some 94 groups, including the AFL-CIO, the Communications Workers, the Postal Workers, Jobs With Justice, AFSCME, the Teachers, IPS, the Asian-Pacific American Labor Alliance, and the United Food and Commercial Workers, are singing a similar tune, in a Sept. 9 letter to lawmakers.
“The wealth of the country’s 708 billionaires alone rose by $1.8 trillion, or 62%, during the pandemic–enough to pay for half of the ten-year cost of the $3.5 trillion package,” they wrote.
“President Biden has proposed we tax wealth like work and close the loopholes that let millionaires, billionaires, and corporations get away with paying less than their fair share. His proposal would tax investment income of the wealthy at the same rate as income from wages and close the loophole that lets the wealthy avoid paying taxes on investment gains for their entire lives and then pass those gains to their heirs tax free.”
Then, paraphrasing the Poor People’s Campaign, they added: “Ultimately, our nation needs a 3rd Reconstruction to provide living wages, strengthen our democracy, curb violence and militarism in our communities, and prioritize the millions of poor and low-income people in the country and their needs.”
There’s still one big problem Ways and Means doesn’t address: The rich have successfully lobbied for years for loopholes in the tax code to let them offset income—including investment income from their wealth—with huge deductions, especially for real estate.
The extent such loopholes, not available to the rest of the country, could undermine even Warren’s “tax the wealth” plan shows up in the leaked first several pages of Donald Trump’s tax returns for 1995, which the New York Times published on Oct. 1, 2016.
The front page of his IRS return, which he had to furnish to New Jersey officials when seeking a gambling license for his now-defunct Atlantic City casino, showed wages and income—the kind you see on your W-2 form—of just over $4,200. It also showed “taxable investment income” of $7.29 million.
But—and this is how Trump escaped paying federal income taxes for years—it showed a net loss on real estate investments of $915 million. The real estate, such as Trump Tower in Manhattan, 401 N. Wabash Avenue in Chicago, and his golf courses, are all part of Trump’s wealth. And since the rich gamed the system to allow such “losses” to be carried forward, offsetting following years’ taxes, Trump did.
CONTRIBUTOR
Comments