The writer, the chairman of the Patriotic Millionaire, is the former managing director of BlackRock and also “Tax the rich!‘
The United States has long had two tax systems: one for people who make a living by working, and the other for the rich. In the past decade, many of America’s wealthiest billionaires have hardly paid taxes on hundreds of billions of dollars in increased wealth. The jaw-dropping new report Revealed from ProPublica.
According to leaked IRS data, the details of this story may be shocking. But this actually only further confirms what we already know. This is not a loophole issue, but a fundamentally different treatment of the rich at the heart of the US tax law.
People who make a living from work—the vast majority of Americans—pay tax rates ranging from about 10% to about 40%. Withholding some money from their paychecks every week, they submit tax returns once a year, and either have to pay a little more to the IRS or get a small refund from the excess withheld.
On the other hand, the rich do not need paychecks. They can use financial derivatives or loans to make money and make ends meet, so they don’t need any “taxable income.” They can hire an accountant to organize their finances so that they can decide for themselves whether and when to pay taxes. Since the United States only levies taxes on capital gains from the sale of assets, the wealthy can accumulate large amounts of wealth before they are completely tax-free, until they decide to cash it out.
This is how the 25 wealthiest Americans accumulated $401 billion between 2014 and 2018, and only paid 3.4% of them in taxes. They all became very wealthy, but because they did not sell the value-added assets they owned, they hardly owed any taxes on the value-added wealth.
Our tax law distinguishes between “increasing wealth” and “income” to make money, which only produces a huge advantage for the wealthiest Americans.
It said that the wealthy people make money by investing in value-added methods and should not be taxed, while the way other people make money, their income, should be taxed. This is a completely arbitrary distinction. Yes, there is a difference between asset appreciation and actual income. But for the wealthiest Americans, it doesn’t matter. Wealth is wealth, no matter what form it exists.
There is nothing in the economy to indicate that you cannot tax unrealized capital gains. This is not a static economic law, but a deliberate policy choice. Based on the surge in inequality in the United States in recent decades, this choice seems to be a very bad choice. Wealthy investors like me, former Wall Street executives, shouldn’t be allowed to choose when to pay taxes on our investments.
There are two solutions. The first is to simply tax unrealized capital gains annually.Senator Ron Wyden has put forward a proposal that he calls mark-to-market, and it can do this, he now Seems to want It was reintroduced after ProPublica’s investigation.
The second is to impose an annual wealth tax on the super-rich, as proposed by Senators Elizabeth Warren and Bernie Sanders.
Both methods have their advantages and challenges, but either one will be a significant improvement to the current status quo.
Although Congress’s ongoing negotiations on tax increases for the wealthy do not seem to include a single proposal, the public’s pressure to take positive action on this issue will only continue to increase, and this is for good reason. There is no defense for tax laws that allow the country’s wealthiest people to pay almost no taxes.
