The April 15 deadline for filing federal income tax returns is fast approaching, and Sen. Elizabeth Warren of Massachusetts is back to remind us just how unfair and unbalanced the nation’s tax system is. After all, it lets the country’s wealthiest people get away with paying a lower tax rate than the average American.
On Tuesday, Warren and other progressive lawmakers renewed their efforts to increase taxes on multimillionaires and billionaires and ensure they pay their fair share.
Warren reintroduced her proposal for an Ultra-Millionaire Tax Act. The UMTA would create a 2% tax on every dollar over $50 million, with an additional 1% tax on households that are worth more than $1 billion, according to a press release by the senator’s office.
The UMTA would affect the wealthiest 100,000 households in the U.S. and bring in at least $3 trillion over 10 years.
The proposed legislation also includes measures to prevent the wealthy from dodging the tax, including $100 billion for the Internal Revenue Service to boost auditing efforts as well as stronger anti-tax evasion rules regarding trusts. It would also deal with capital flight by introducing a 40% “exit tax” on people worth more than $50 million if they choose to give up their U.S. citizenship to avoid taxation.
Warren’s bill has the support of five Democratic senators, 27 Democratic House members, and independent Sen. Bernie Sanders of Vermont. Sponsors in the House are Progressive Caucus Chair Pramila Jayapal of Washington state and Rep. Brendan Boyle of Pennsylvania.
“As President [Joe] Biden says: no one thinks it’s fair that Jeff Bezos gets enough tax loopholes that he pays at a lower rate than a public school teacher,” Warren said. “All my bill is asking is that when you make it big, bigger than $50 million dollars, then on that next dollar, you pitch in two cents, so everyone else can have a chance.”
The legislation stands little chance of overcoming a filibuster by GOP senators, and even if it did it would be dead on arrival in the (nominally) Republican-controlled House.
But the Ultra-Millionaires Tax Act does send a strong message about the widening gap between the richest Americans and the rest of the country just as the 2024 presidential race picks up steam, as the Institute on Taxation and Economic Policy, a liberal think tank, noted Tuesday.
According to University of California-Berkeley economists Emmanuel Saez and Gabriel Zucman, the richest top 0.1% have seen their share of American wealth triple from 7% to 20% between the late 1970s and 2019, while the bottom 90% have seen their share drop from about 35% to 25%.
”For too long, the ultra-wealthy in America have been able to dodge taxes on a large scale. As a result they often pay much less, relative to their ability to pay, than the rest of the population. The ultra-millionaire tax would address this fundamental unfairness, and raise critical revenues for much needed investments that would make the country—and us all—richer,” Saez and Zucman were quoted as saying in Warren’s news release.
And there’s good reason to be outraged when you look at the true federal tax rate for the wealthiest Americans and compare it to your tax rate.
In 2021, a study by White House economists estimated that America’s 400 wealthiest families paid an average federal individual income tax rate of 8.2% from 2010-2018.
A ProPublica investigative report in 2021 based on a trove of Internal Revenue Service data showed just how the ultra-rich were able to legally use tax-avoidance strategies to pay income taxes that were only a tiny fraction of the hundreds of millions, if not billions, by which their fortunes increased.
ProPublica found that the 25 richest Americans paid a true federal tax rate of only 3.4%, while the median American household earned about $70,000 annually and paid 14% in federal taxes. And Amazon’s Bezos? He had a true tax rate of only 1%.
What’s even more outrageous is that there were several years in which Bezos, Elon Musk, Michael Bloomberg, and George Soros did not pay a penny in federal income taxes, according to ProPublica.
Then there’s Donald Trump, whose tax information spanning more than two decades was obtained by The New York Times. In September 2020, the Times revealed that Trump’s finances were under stress, his properties were struggling, and he had hundreds of millions of dollars in debt, enabling him to claim vast tax write-offs. The Times wrote:
Donald J. Trump paid $750 in federal income taxes the year he won the presidency. In his first year in the White House, he paid another $750.
He had paid no income taxes at all in 10 of the previous 15 years — largely because he reported losing much more money than he made.
Remember what Trump said during a 2016 presidential debate, after Hillary Clinton called him out for not paying any federal income tax, according to some of his returns?
Trump responded, “That makes me smart.”
Given how much the super-rich have benefited from such a rigged system, it shouldn’t come as any surprise that raising taxes on the ultra-wealthy enjoys broad support, even among Republicans.
USA Today wrote:
Warren’s bill – dubbed the “Ultra-Millionaire Tax Act” – was first introduced in 2019 and became a major part of her 2020 bid to be the Democratic presidential nominee. The idea proved popular: Nearly 70% of likely voters said they supported it in a 2021 poll from left-wing think tank Data for Progress. Sixty-three percent of Americans said they approved of the idea in a 2019 survey from The New York Times.
Biden said a fair tax code is “how we invest in the things that make a country great, health care, education, defense, and more.” He pointed out that the previous administration had enacted a $2 trillion tax cut that overwhelmingly benefited the very wealthy and the biggest corporations, and “ended up adding more to the national debt than in any presidential term in American history.”
Instead, Biden called for raising taxes on big corporations and the very wealthy. He said:
“No billionaire should pay a lower tax rate than a teacher, a sanitation worker, a nurse! That’s why I’ve proposed a minimum tax of 25% for billionaires. Just 25%. That would raise $500 Billion over the next 10 years. Imagine what that could do for America.”
In his 2025 budget proposal, Biden included provisions “to make wealthy people pay their fair share,” These include a 25% minimum tax on the wealthiest 0.01%—that’s people worth more than $100 million—raising the top tax rate on the wealthiest Americans making more than $400,000 a year back to 39.6% (Trump’s 2017 tax cuts lowered the rate to 37%), and ending the capital gains tax break and other loopholes that benefit the very wealthy.
Biden’s proposed budget would cut taxes for low- and middle income families, and restore the expanded Child Tax Credit that lifted 3 million children out of poverty.
Like Warren’s UMT, Biden’s proposed tax increases on the wealthy are likely a non-starter for Republican lawmakers, even though his proposed increases are lower than what Warren is proposing.
It’s important to remember that many of the individual tax cuts included in the 2017 Trump-backed tax bill—the only significant piece of legislation passed during his term—are set to expire at the end of 2025.
Trump and the Republicans want to extend the tax cuts and make them permanent. That would cost nearly $4 trillion over the next decade, The Wall Street Journal reported. Biden has proposed extending the 2017 tax cuts for households making under $400,000 and raising taxes on corporations and the wealthiest Americans, which would generate more than $2 trillion beyond current forecasts.
Whoever sits in the White House in 2025 will have a lot to say about which way the pendulum will swing on tax policy. Joe Biden will move the country toward reining in the plutocracy and moving toward economic justice, providing funds for programs that will make America great for more of its people. Donald Trump will not—and he is capable of doing so much worse.
