The schizoid Republicans want all the goodies in President Joe Biden’s “Build Back Better” agenda (except for what lifts up “other” people), but demand pay-fors, except the only “pay-fors” they will accept is to put even more burden on those who actually do the work of Building Back Better.
They scream about the national debt (they didn’t raise an eyebrow at the $8 trillion Trump added and the budget deficits he ran up, largely because of his 2017 Tax Scam) and now threaten to refuse to raise the debt ceiling – essentially defaulting on the bills they already authorized – which would destroy the “full faith and credit” upon which our economy is based.
Even the so-called “moderate” Democrats (looking at you Sen. Joe Manchin) are balking at the $3.5 trillion price tag of the “human infrastructure” package, even though that amount would be spent over the next 8-10 years (unlike the $4 trillion in COVID relief packages passed under Trump of which an extraordinary amount was steered directly to Trump and Treasury Secretary Mnuchin’s cronies and millions defrauded because of the lack of oversight). And, unlike those packages, would be an investment in the future, and more than recoup the investment.
The way to pay is through reforming the tax code, and especially undoing the 2017 Trump tax package which steered 83 percent of the benefits to the wealthiest 1 percent. As Biden has said, 55 of Fortune 500 companies paid zero tax on their profits.
Any change in the tax code, Republicans shriek, would be “income redistribution” (“Socialism!) when in fact, over the past 40 years, that is exactly what they have been doing, as all the real increase in wealth has flowed to the wealthy, while the rest are barely keeping up with inflation.
Democrats have come out with a more pragmatic tax reform proposal to finally get the richest individuals and corporations to pay their fair share of income (not wealth).
Raise the tax rate on the wealthiest: Democrats want to return to the 39.6 percent, the rate before Republicans cut it to 37 percent; the new rate would kick in for single people who make more than $400,000; married with taxable income over $450,000 (so after deductions, this means that incomes are high; this would impact only the top 1.8 percent). The wealthiest – those with adjusted incomes over $5 million – would pay a 3 percent surtax.
Raise corporate taxes: Biden has proposed raising the corporate tax rate to 28 percent (still well below the 35 percent that was in effect before 2017 lowered it to 21 percent); House Democrats are proposing a graduated rate structure, to 26.5 percent for companies with taxable income of over $5 million, but remain at 21 percent for those netting under $400,000.
Democrats also are proposing a tax rate of 16.6 percent on corporate foreign earnings (up from 10.5 percent), while Biden has also sought a global minimum so corporations don’t shop around for the lowest tax jurisdictions.
Meanwhile, Biden is also looking to increase IRS enforcement to get the cheaters to pony up. This is expected to raise some $700 billion. (For some reason, the Republicans are really upset with that.)
These measures would raise an estimated $2.9 trillion – though it is very likely that, unlike the mythical “Trickle Down” theory that Republicans have used for decades to justify endless tax cuts, the Build Back Better agenda will lead to actual increases in revenue and decreases in expense (climate disasters costing $121 billion a year; Medicaid, food stamps and the social safety net enchilada, amounting to $360 billion a year).
Here are more revenue-raising ideas that Democrats should incorporate:
So far, there is nothing in these proposals to eliminate the tax loopholes and tax shelters that are so abused (and get ahead of the biggest loophole of all that is emerging, cryptocurrency).
Get rid of the carried interest loophole that makes financial people (the ones who get fabulously rich using other people’s money), that lets them pay the much lower capital gains rate instead of income tax rate.
Eliminate tax deductions for corporations that off-shore jobs and taxable income – that would be an appropriate use of tax policy.
Raise the FICA cap, from $137,700 to say $5 million, which would eliminate the constant insecurity of Social Security going bust or benefits being cut to keep it solvent for the 10,000 Baby Boomers reaching retirement each day. The 8.5 percent that is extracted from wage earners’ paychecks (17 percent if self-employed) is one of the reasons that working people pay a higher tax rate than the rich.
While they won’t be able to enact a “wealth” tax, they can address the scam the uber-rich use, where in lieu of income, they take out revolving loans using rising asset values as collateral, pay off the interest which they then take as a tax deduction.
They should eliminate the deductibility of those interest payments, beef up the Alternative Minimum Tax (why isn’t the AMT already in force?). If the AMT doesn’t capture a fair tax rate, instead of a “wealth” tax, there should be a Value Added Tax on purchases and spending that more accurately reflect income.
These proposals don’t address the limit on SALT (State and Local Tax) deductions, which was put into the 2017 Tax Plan to punish Blue States (Donor States), foment voter discontent for their Democratic electeds and reduce the deficit their tax giveaways would incur. Congressman Tom Suozzi is demanding SALT be repealed altogether, saying “No SALT, no deal.” (That is wrong; problems with SALT can be addressed at a future time.)
But when a SALT resolution came up in the Senate votarama over the $3.5 trillion reconciliation package, Senator Chuck Grassley, in a brazen example of chutzpah, chided Democrats, saying, “Could you with a straight face argue that a vote to protect these workarounds is not a vote to provide a massive tax cut to the wealthy?
For Democrats who intend to vote for this tax scam anyway, I don’t want to hear any more long-winded speeches about how tax reform benefitted the wealthy.”
Of course, his tirade failed to take into account the higher cost of living in New York, California, Massachusetts than Taker States like Iowa.
A group calling themselves Patriotic Millionaires (because they are) are actually pleading to pay higher, fairer tax rates and argue that the 2017 GOP Tax scam not only exacerbated inequality but is destabilizing. “It’s not good for community, society and democracy,” remarked entrepreneur and Patriot Millionaires member Kristin Luck.
“It is absurd that money earned from labor, from sweat and hard work, is currently taxed at nearly double the rate as money earned from passive investments,” stated Morris Pearl, former managing director at Blackrock, Inc., chair of the Patriotic Millionaires, and co-author of Tax the Rich!.
“Each of these tax increases would affect only the wealthiest Americans, a group that has seen their fortunes grow substantially over the last several decades and throughout the pandemic. Wealthy Americans like me can more than afford to pay higher taxes, and we should be expected to. With these plans, the Biden administration is ushering in a new, better vision for what our tax code should look like, one that shrinks inequality instead of contributing to it. The era of trickle-down nonsense is over – it’s time to tax the rich.”
