Congress must make taxes on stocks, income more fair
Illustration by DonkeyHotey(via Flicker | CC-BY-SA 2.0)
Working people are the backbone of our economy. Our tax system is so unfair that a billionaire living off his Wall Street investments can pay a lower tax rate than an emergency-room nurse tending to COVID patients or a truck driver who keeps our economy going by delivering key components overnight.
That’s because our tax code privileges 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 from a job. But the super-rich let their money do their work for them. Their income is largely in the form of investment gains: 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 capital gains—and a related payment to stockholders known as “dividends”—that get the nearly half-off tax-rate discount.
That’s how billionaires have gotten more and more wealthy during this pandemic, while millions of regular people lost jobs, small businesses, income, healthcare and much more. In Montana alone, four billionaires increased their wealth by 41% while 249,045 lost jobs and 33,500 went without healthcare.
It gets worse.
Not only are the rich 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 the “stepped- up basis”.
Another way our rigged tax system rewards wealth over work is how little it taxes the corporations that rich people own in the form of stock shares. 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 law, corporations got a huge discount on their taxes when the corporate tax rate was slashed from 35% to 21%. Under the same law, millionaires also got big tax breaks, while average families got much less. In 2020, the richest 1% of Montanans got an average tax break of $43,950, while the middle income people got an average reduction of $670.
Currently, Congress is discussing one of our best chances to create a more equitable tax structure in Build Back Better. Representatives and Senators want to start unrigging this rotten system by rewarding work and not just wealth. This proposal would make the super wealthy—those making more than $1 million a year—pay the same tax rate on their investment income as they do on their wages. They would close the stepped-up basis loophole for capital gains more than $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.
No one making less than $400,000 a year would pay higher taxes under the proposed tax plan. The revenue raised from fairer taxes on the rich would help working families by making healthcare, childcare and education more affordable; and providing tax credits to working families so they have more money to spend.
As a retired faith leader and a board member of a senior organization, I see firsthand the dire need to level the playing field for hard working Montana families. I see hard working families struggle daily and it has grown worse during the years right here in Billings. We are not alone in supporting these reforms. Polls consistently show people across the aisle want the rich and corporations to pay their fair share and that money used to improve the lives of all in our communities.
We have a historic opportunity this year to balance 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 the Montana Members of Congress to support this effort.
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