A Welcome New Twist on America’s Tax Future
Uncle Sam Postcard – Public Domain
Republican leaders in Congress have been working feverishly over recent days to renew the rich people-friendly 2017 Trump tax cuts set to expire at this year’s end. Both the House and Senate have now passed bills that do that renewing — and also add in some assorted new goodies.
All that remains before this latest giveaway to grand fortune becomes law: a bit of dickering between House and Senate GOP leaders over the tax cut’s particulars and then Donald Trump’s John Henry on whatever legislation that dickering ends up producing.
Trump can barely wait for the signing ceremony. But he’s also pushing for much more than an extension — and expansion — of those 2017 tax cuts. His ultimate goal: erasing taxes on income from the entire federal tax code.
“You know,” Trump told a press conference this past Tuesday, “our country was the strongest, believe it or not, from 1870 to 1913. You know why? It was all tariff based. We had no income tax.”
Over those years, federal revenue most certainly did come mostly from tariffs. And those tariffs did work wonders — for the nation’s rich. Our original Gilded Age wealthy frolicked in an America where the rich and their corporations could essentially operate however they pleased. They could pay their workers precious little and cavalierly short-change consumers at every opportunity.
In that same America, the federal government did precious little to protect average Americans from greed and grasping — and even less to make their lives more economically secure.
Changing that profoundly unequal state of affairs took decades of organizing on the part of workers, farmers, and middle-class reformers. By 1913, that organizing had paid off. The ratification of the 16th amendment to the U.S. Constitution that year gave Congress the authority to levy income taxes. By the end of World War I, America’s wealthy faced a 79-percent levy on their top tax-bracket income.
But the nation’s rich would come roaring back in the Roaring Twenties. America’s wealthiest flexed their political muscles enough to get that top tax rate down to 25 percent. They would go on to party hardy throughout that decade, right up until the 1929 stock market crash. The 1930 Smoot-Hawley Tariff Act that Trump so likes to trumpet helped turn that crash into the Great Depression.
Amid that unprecedented downturn, America’s grassroots would rise up and break the plutocratic lockgrip on public policy. Working people would gain collective bargaining rights. Seniors would gain Social Security. The super rich would gasp as federal tax rates on their top-bracket income jumped to over 90 percent.
The end result? By the mid-1950s, over half America’s households had money left over after meeting their most basic living expenses. No modern nation had ever before reached that status.
That share-the-wealth momentum, unfortunately, would soon begin ebbing. Since the late 1970s, as the Economic Policy Institute has detailed, only Americans of substantial means have been sharing in Corporate America’s economic bounty.
How can we change this top-heavy state of affairs? Last week, at an unusual conference in Washington, D.C., activists highlighted a detailed agenda for making America start working for all Americans, not just the wealthiest among us. What made this confab so unusual? The people who put it together all just happen to rate as wealthy themselves.
The sponsor of this How To Beat the Broligarchs gathering: Patriotic Millionaires, the national group that’s been organizing Americans of means to “tax the rich, pay the people, and spread the power” since 2010. This past week’s broligarch-bashing conference gave these millionaires — and activists and scholars equally interested in creating a more equal United States — a vibrant forum for sharing information, insights, and, most importantly, an ambitious gameplan for ending rule by the rich.
“Our economy should be judged on how well it takes care of working people,” as Patriotic Millionaires founder Erica Payne notes, “not on how many billionaires it mints in a calendar day.”
To take better care of working people, the new Patriotic Millionaires economic plan, entitled America 250: The Money Agenda, proposes a “Cost of Living Tax Cut Act” that would exempt all annual income up to $41,600 — the current cost of living for the typical American adult — from federal income tax.
Another Patriotic Millionaires-proposed piece of legislation, the “Cost of Living Wage Act,” would nearly triple the federal minimum wage, from $7.25 an hour to $20, a rate that would adjust every year to rising prices.
To help trim our richest down to something resembling democratic size — and offset the cost of exempting low incomes from income tax — the Patriotic Millionaires plan would also start subjecting millionaires to a surtax on their taxes due.
Another part of the plan would tax the capital gains millionaires pocket — their profits from buying and selling stocks and other assets — at the same rate as ordinary earned income. Still another plan section would essentially prevent the mostly tax-free intergenerational transfer of assets from the super rich to their super fortunate offspring.
What makes that prevention so important? Under current law, point out Patriotic Millionaires analyst Bob Lord and law professors Brian Galle and David Gamage in a new research paper, between 80 and 90 percent of the wealth “that rich families have set aside for their heirs will likely never be subject” to the over-a-century-old federal estate tax.
The first phase of the “Anti-Oligarchy Act” the Patriotic Millionaires plan is proposing would have all inheritances over $1 million taxed as ordinary income. This phase would also “impose a progressive tax on large sums of trust-held wealth to limit the accumulation of dynastic wealth.”
The second phase would seek to impose “a tax on the wealth of the richest Americans sufficient to reduce their wealth to a level in harmony with the ideals of democracy, amending the United States Constitution if necessary.”
The pollsters at Gallup have just asked Americans if they worry “a great deal” — or much less — about 16 different current-day concerns. Some 48 percent of Americans say they worry “a great deal” about how “income and wealth are distributed,” a remarkably high share of the public given how seldom our media and politics directly address that distribution.
The new Patriotic Millionaires tax plan obviously isn’t going to become the law of the land anytime soon. But the plan could help refocus America’s political debate onto the dynamics that are threatening to destroy our democracy. Let’s get that debate going. Soon.
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