Progressives, Don’t Just Bash the GOP Tax Bill, Make a Better One of Your Own
While slashing taxes for some of the country’s most privileged, including Donald Trump and his family, the GOP's seemingly unstoppable scheme to reform the tax code fail to address America’s most pressing problems: rising inequality, the climate crisis, macroeconomic instability and declining resources for needed public services in urban and rural America alike.But progressives should resist the temptation to simply attack the GOP giveaway to the ultra-rich; Instead, they should articulate their own tax plan, one that would fund needed services, promote stable growth, and compensate the unlucky, including the victims of globalization.We can have a tax system founded incoherent economic theory, a system that promotes fairness and economic efficiency by following three reasonable principles: all forms of income should be taxed equally, dangerous and destructive activities should be discouraged, and the distribution of income should reflect work rather than luck.Ensure fair taxation of all forms of income: · Tax all corporate profits regardless of where they are earned. While keeping the corporate tax rate at 35%, eliminate the deferral of taxes on profits earned outside the United States. According to the Institute on Taxation and Economic Policy, corporations currently owe $700 billion in taxes on $2.6 trillion worth of profits, parked abroad in tax havens like the Cayman Islands. · Eliminate preference for investment over earned income.
Since 1990, capital gains and some dividends are taxed at a lower rate than is earned income and wages. While workers pay payroll taxes for Social Security and Medicare, and 25% income taxes on earnings above $37,651 and more on wage and salary income above $91,150, capital gains income is taxed at 15% for most Americans, and no more than 20% for higher incomes. Eliminating this preferential treatment and taxing unearned income at the same rate as earned income would raise more than $100 billion a year in additional revenue.· Eliminate the tax preference for high wage income. The retirement payroll tax that funds Social Security only applies to the first $118,500 of income so about 6 percent of wage and salaryearners only pay the tax, 12.4 percent, on part of their earnings. Restoring the Social Security payroll tax for the richest 1 percent, those with wages and salaries above $300,000, would raise over $50 billion. Promote economic efficiency:· Restore the Financial Transactions Tax and implement a financial excise tax. Until 1966, the United States, like 30 other countries including the United Kingdom, Singapore and Switzerland, taxed financial transactions to discourage speculative financial activities that would distract from businesses’ productive work. Taxing the giant banks would restore the economic balance, favoring the productive activities of Main Street over the financial shenanigans of Wall Street. A tax like this would raise more than $100 billion while increasing economic efficiency.· Reduce the deductibility of low wages and strengthen the penalty for companies that do not provide health insurance or pension benefits. The public safety net, including SNAP and Medicaid, bear much of the burden when profitable companies pay low wages. Forbes estimated that in 2014 low-wage workers at Walmart received more than $6 billion in public assistance; Connecticut taxpayers in 2015 payed nearly $500 million in public assistance to employees of profitable businesses., found a study by the University of Connecticut. Taxing low-wage employers would encourage higher wages while raising more than $14 billion in revenue.· Tax carbon emissions at $25/ton rising by $10/ton every year. The build-up of carbon dioxide in the atmosphere from the burning of fossil fuels is already transforming the environment with devastating effects on crops, forests, and sea-side communities. Charging for the damage done by burning carbon would slow global climate change and encourage the growth of energy efficient and green industries. It would also raise nearly $100 billion a year at $25/ton and more at higher rates.Reward work not luck· Restore the 1980 estate tax rate (adjusted for inflation). In 1980, the estate tax rate was 70% with an exemption (for gifts and estates) of about $1,000,000 in 2017 dollars. At this level of exemption, more than 97% of estates would go untaxed because the great majority of Americans are not fortunate enough to be born into families with such large estates. Revenue would increase by more than $50 billion, the great majority paid by a very small number of very lucky people.While promoting healthy and stable economic growth, this program would generate more than $500 billion a year in additional revenue. If $400 billion of this revenue was devoted to eliminating income and payroll taxes for households with family income of under $75,000, then that would still leave $100 billion to spend on priorities like infrastructure and education. Instead of the Republicans proposals designed to enrich a few, opponents can present a coherent program founded on principles of fairness. That is the tax reform that working Americans deserve. Tax reform that will truly make America great.This story was supported by the Economic Hardship Reporting Project.
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