Our tax system is so unfair that a billionaire living off his Wall Street investments can pay a lower tax rate than an ER nurse tending to COVID-19 patients or a truck driver who keeps our economy going by making overnight deliveries.
That’s because our tax code is rigged to favor wealth over work: The top tax rate on the main sources of investment income (20%) is only about half the top rate on wages and salaries (37%).
Most of us make our living going to work. But the super-rich let their money do their work for them. Their income is largely in the form of investment profits, the rising value of their stocks, bonds, real estate, private businesses and more. When they sell one of those investments for more than its purchase price, that’s called a “capital gain.” It’s these capital gains — and related payments to stockholders, called “dividends” — that get the discounted tax rate that’s nearly half of the top rates wage earners pay.
That’s how millionaires and billionaires have gotten more and more wealthy during this pandemic, while millions of us regular people lost jobs or small businesses and took a major hit on income, health care and much more.
But it’s even more rigged. Not only are millionaires getting richer while millions of the rest of us are getting by, but the wealthy also get to keep their wealth tax free, thanks to a special tax break that allows a whole lifetime of investment income to completely avoid income tax forever. That loophole is called a “stepped-up basis,” where profits from investments never get taxed and then are inherited tax free.
Another way our rigged tax system rewards wealth over work is how little it taxes the corporations the rich own through their shareholdings. The wealthiest 10% of Americans own almost all the nation’s corporate stock. Last year, 55 huge firms — including FedEx, Nike and Salesforce.com — paid zero federal income taxes, despite combined profits topping $40 billion. Multinational companies dodge taxes by hiding profits and shipping jobs offshore.
Thanks to the 2017 Trump tax giveaway, corporations got a huge discount on their taxes when the corporate tax rate was slashed from 35% down to 21%. Under the same law, millionaires also got big tax breaks while average families got much less. In West Virginia, the richest 1% got an average tax break of $26,540, while middle-income workers averaged a little over $500 reduction and the bottom 20% got a measly $40.
President Joe Biden and Democrats in Congress want to start unrigging this rotten system by rewarding work and not just wealth. Their reforms would make the super wealthy — those making over $1 million a year — pay the same tax rate on their investment income as we do on our wages. They would eliminate the “stepped-up basis” loophole for capital gains over $1 million. And they would curb offshore corporate tax dodging and raise the corporate tax rate, to ensure big companies pay a fairer share and keep good-paying jobs here.
Only those making more than $400,000 a year would pay higher taxes under this plan. On a national scale, that is 1.2% of all U.S. taxpayers. In West Virginia, I imagine it’s well under 1%.
The revenue raised from making the wealthy pay their fair share would help working families by making health care, child care and education more affordable, and providing tax credits so they can make ends meet.
If these tax reforms and care-infrastructure investments make sense to you, you’re not alone. Polls consistently show Democrats, independents and Republicans want the rich and corporations to pay their fair share and that money should be used to rebuild our nation and put folks back to work.
Millionaires and the politicians they fund obviously want to keep a system that’s rigged to favor them. That’s why they’re attacking the plan to make everyone pay a fair share with phony arguments. None of us should be fooled.
We have a historic opportunity this year to unrig our tax code so that the wealthy and corporations pay closer to their fair share and we have enough money to invest in the needs of working families. I urge Sens. Joe Manchin, D-W.Va., and Shelley Moore Capito, R-W.Va., to support this effort. I hope everyone in our state weighs in on this issue.
