Hi there.
As I said last week, we’ll be looking at the economy and other money-related forms of public policy on Fridays this month. And if you’ve been following infrastructure talks, you know that Republicans and Democrats are fighting over whether to raise income taxes on millionaires and billionaires.
But a new bombshell investigation from ProPublica might suggest that raising their income taxes might not be enough to compel the richest Americans to pay their fair share. Currently, the top income tax rate is 43.4%, a far cry from the 91% the United States charged during the more economically stable 1950s and 1960s. But the ProPublica report reveals that the twenty-five richest Americans don’t pay that 43.4%; they don’t even pay the 24% most Americans pay. Rather, their true tax rate is just 3.4%. Warren Buffett pays just 0.1%. Many top billionaires, including Jeff Bezos and Elon Musk, have avoided paying any income taxes whatsoever some years.
It’s important to understand that what’s happening here isn’t technically cheating. It’s not illegal. There has been a lot of talk about better funding the IRS to crack down on tax fraud, and that’s great, but it wouldn’t help the problem we’re seeing here. These billionaires are legally avoiding receiving much in the way of taxable income, while still actually earning billions.
They do this using stocks. If you own stocks, those are sometimes called unrealized assets. They have value, but until you sell them, the value is mostly theoretical. People like Bezos and Buffett, though, have a lot of stock, and they regularly take out millions and billions of dollars in loans, using those stocks as collateral. Those loans- which, like unsold stocks, aren’t easily taxed- then pay for their lavish lifestyles: helicopters, private islands, yachts, you name it.
There’s a simple solution, one that has been floated by Senator Elizabeth Warren for years: a wealth tax.
The proposal is simple. Every year, Americans with a net worth of more than $50 million pay the IRS a flat 2% tax on their wealth. For Americans with more than $1 billion in wealth, that rate rises to 3%.
I can’t think of the downside here. And believe me, I’ve tried. The proposed rates are low enough that there’s no danger of draining millionaires and billionaires of their wealth (they’ll still be able to afford yachts), but high enough to make sure they’re contributing their fair share to the federal government. It should be a no-brainer but, of course, we’re probably years away from Congress acting on it.
For more on this, check out a recent editorial from the New York Times, lamented all of the legal loopholes in the American tax code.
In other news, Vox reports on the growing popularity of guaranteed income programs. Axios reveals that loads of federal unemployment subsidies have been stolen by foreign crime syndicates. And the Brookings Institution looks at the labor market.
Meanwhile, in the private sector, the NYT reports on French antitrust charges against Google, and on Netflix’s new e-commerce shop.
Lastly, Vox dives into the wild world of the meme economy. Cheers to that.
Thank you for caring enough to read.
Be safe. Enjoy your weekend. You are loved.
Talk to you Monday.