Imagine a society with two tax systems, one that taxes the wealth people have accumulated and the other the labor they perform. This two-pronged approach to taxation is working fairly nicely. It’s raising enough tax revenue to finance the public goods and services that voters have told lawmakers they want to see supported.
But then trouble hits. Those same lawmakers decide to cut taxes on wealth and raise them on labor. And they make those moves at the same time that income from labor is shrinking and stashes of great wealth are dramatically expanding.
No democratic, fair-minded society would ever accept such a dumb move, would it? Unfortunately, ours has. For over 40 years now, our U.S. tax system has been winking at the wealth of the wealthy and insisting on tax-time business as usual for working people.
Indeed, our national tax tilt to the top has become even more extreme over recent years. In 2017, at the behest of Donald Trump, our politicians doubled down on the timidity of our U.S. tax system. They slashed taxes on the corporations rich people run. They cut away at taxes on income from wealth. Taxes on worker wages, meanwhile, remained little different.
The overall result? A stunning acceleration of grand private fortune in the United States. In 2013, the most recent annual Forbes list of America’s 400 richest had pegged their combined total wealth at $1.7 trillion. In that year, just one American, Bill Gates, held a personal fortune worth over $50 billion. Today, just eight years later, that same $1.7 trillion sits in the hands of a mere 15 American billionaires, all of them personally worth over $50 billion.
A few politicians on the national scene did warn us about that incredible greed grab. Pols like Bernie Sanders and Elizabeth Warren repeatedly urged higher taxes on our “billionaire class.” But they found themselves regarded as outliers, far outside the political mainstream.
No longer. The mainstream has shifted remarkably. President Joe Biden — the moderates’ moderate through his decades on Capitol Hill — earlier this year proposed tax changes that would if enacted into law finally begin to reverse the trends of the past 40 years.
“Trickle-down economics,” as the President told the nation last spring, “has never worked.”
Biden’s original proposals asked Congress to increase the tax rates on capital gains and corporate income. And progressive members of Congress have added in their own proposals. Some, like Senator Warren, are calling for direct taxes on wealth. Others seek to overhaul America’s porous estate and gift tax system. Still others are working to close gaping loopholes — like the infamous “stepped-up basis” rule — that give income from wealth what amounts to near a free pass from taxes.
This willingness to contemplate inconveniencing the richest among us reflects a fundamental shift in the attitudes of Americans generally. In poll after poll, public support for Biden’s domestic spending package runs at decent levels. But that support increases when respondents learn that the President wants to see his proposed programs funded via higher taxes on the rich and their corporations. According to one Pew Research poll, a whopping 80 percent of Americans believe corporations and the wealthy don’t pay their fair tax share.
Major roadblocks to meaningful change in our rich people-friendly tax system, naturally, still do abound. With great wealth, after all, comes great political influence. That reality hasn’t changed, and we see great wealth’s great influence today in the Orwellian turn that negotiations within the Democratic caucus in Congress recently took. In the House and Senate, a small group of Democratic Party lawmakers insisted that President Biden wanted to spend too much. These few members wanted that spending pared back and argued that any paring back on this front would make it necessary — and appropriate — to pare back the President’s tax-the-rich proposals as well.
Will that small band of conservative Democrats extract further concessions? We’ll see. In the meantime, consider the “logic” in their position. They’re essentially arguing that common-sense tax reforms should not be enacted so that we can forgo needed investments in the well-being of the American people.
This sort of logical nonsense can only take root in a nation where a tiny minority of the population has amassed a ridiculously large share of the society’s wealth, a society, in other words, just like ours. We have more billionaires in the United States today than Germany, Russia, the UK, Hong Kong, Switzerland, India, Saudi Arabia, France, and Italy combined.
Worldwide, adds the Swiss banking giant Credit Suisse, wealthy Americans now make up 55 percent of adults with fortunes worth over $50 million.
Concentrations of private wealth this huge poison the democratic political process. But poisons need not be terminal. And in this particular case we know the antidote: a tax system that starts making sure that all of us contribute to our common good.
The wealthy would like us to believe that the rich always win. They don’t. But we’ll never beat them sitting on our hands. Stand up. Speak out.
Bob Lord, a veteran tax attorney and Institute for Policy Studies associate fellow, currently serves as tax counsel to Americans for Tax Fairness. Sam Pizzigati, also an IPS associate fellow, co-edits Inequality.org. His most recent book: The Case for a Maximum Wage.