Here's a Good Topic for Candidates to Debate: Taxing the Filthy Rich
“The wealthiest of the wealthy have figured out how to get richer and richer and richer and richer in ways that just don’t show up on a tax form," said Sen. Elizabeth Warren at a recent Senate hearing. It's time to change that.
The first televised U.S. presidential debate came way back in 1960. Few of us who happened to watch that debate remember much about it. But a look back at the transcript of that debate — a session that concentrated on domestic issues — shows that the evening’s proceedings mentioned not a single word about a stunning domestic transformation then about midway through its third decade.
That transformation? The United States had become a significantly more economically equal nation. With federal tax rates running as high as 91 percent on top-bracket income and unions representing more than a third of America’s private-sector workers — over five times today’s private-sector union share — the United States had given birth to the world’s first mass middle class.
In just a single generation, America had gone from a nation where the richest 1 percent held nearly half the nation’s wealth to a nation where that top 1 percent held only just over a fifth of that wealth.
This stunning reality came up nowhere in that first debate between the Democratic Party candidate John Kennedy, then a U.S. senator, and Richard Nixon, the nation’s Republican vice president.
But what if that debate had explicitly recognized that reality? What if that debate’s panel of journalists had asked the candidates whether they would encourage or discourage, strengthen or trim, the tax and labor policies that had created a much more equal United States?
If those journalists had asked questions along that line, would John Kennedy, once president, have dared to ask Congress, as he did in 1963, to drop the top-bracket tax rate on America’s richest down to 65 percent?
That Kennedy-era Congress would end up lowering the nation’s top tax rate, from 91 to 70 percent. A bit over two decades later, in Ronald Reagan’s second term in the White House, that top rate would sink all the way down to 28 percent.
The current top rate? On income over $731,201, married couples filing jointly face a 37 percent tax rate. Taxpayers making 100 times that $731,201, over $73 million, face that same 37 percent top rate. And on “capital gains,” the profits from the sale of stocks and other assets, these rich pay taxes at no more than a 20 percent rate.
At last week’s first — and probable last — debate between Kamala Harris and Donald Trump, the two candidates faced no questions on how little in taxes our contemporary tax code expects rich people to pay. Few noticed. But last week, at a Senate hearing on Capitol Hill, Finance Committee chair Ron Wyden from Oregon did his best to inject how much in taxes rich people don’t pay into America’s most high-profile political deliberations.
The bargain-basement tax rates on high incomes now in place, Senator Wyden made vividly clear, only hint at the tax windfalls our super rich are now regularly realizing.
Our billionaires, Wyden noted as he opened the hearing, can essentially “avoid paying taxes forever” through a neat trick tax justice advocates have come to label “buy-borrow-die.”
Our ultra-wealthy, Wyden went on to explain, are using their wealth to acquire valuable assets, then watching those assets appreciate and borrowing against the higher value of those assets to generate the cash they need to maintain their luxurious lifestyles. Eventually, of course, these deep pockets die, but any tax owed on their investment gains simply “disappears into the ledgers of history.” Their heirs face no tax whatsoever on the gains their benefactors have left them.
“This kind of tax trickery isn’t available to nurses and firefighters and tradesmen. Their taxes come straight out of every paycheck,” Wyden pointed out. “The ultra-wealthy get their own special set of rules.”
Long-time tax attorney Bob Lord, the current senior advisor on tax policy for the Patriotic Millionaires network and an Institute for Policy Studies associate fellow, expanded on “buy-borrow-die” and assorted other lucrative tax dodges in his testimony today before Wyden’s panel. Those dodges could — and should — take center stage in 2025, he agreed, as America’s lawmakers debate whether to extend the 2017 Trump tax cuts for the rich set to expire by next year’s end.
Republican lawmakers on the Senate Finance Committee spent a huge chunk of their time at today’s hearing depicting America’s rich as noble souls doing their best to create jobs in the face of a tax system that harasses them at every turn. Senator Elizabeth Warren from Massachusetts disputed that depiction.
“The wealthiest of the wealthy have figured out how to get richer and richer and richer and richer in ways that just don’t show up on a tax form,” Warren noted. “The result: The top one-tenth of 1 percent pays about 3.2 percent of their wealth in taxes every year while the bottom 99 percent pays more than double that.”
The Biden-Harris administration, the Massachusetts senator added, has advanced a proposal that would subject Americans with net worths over $100 million — the nation’s wealthiest 10,000 people — to a minimum 25 percent tax on their income, well below our federal tax code’s current 37 percent top rate.
But these wealthy, Warren continued, are claiming that they don’t have the money to pay that tax because their wealth is sitting “all locked up in stocks.”
“Are these 10,000 mega-millionaires actually cash-poor?” Warren asked Robert Lord, the veteran tax attorney witness. “Are they living like monks?”
“I haven’t seen,” Lord smiled in reply, “many monks on yachts.”
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