Warning: the rest of this post is about taxes, so here is a Beatles song to get you through:
Since George W. Bush became president, the US government has not raised enough tax revenue to fund its programs, and the US National Debt is currently over $14 trillion (trillion - that's twelve zeroes after the 14!). The tax system as a whole is regressive, with Warren Buffett and Fortune 400 members having a lower tax rate than their secretaries. In addition, many corporations like GE pay little to nothing in taxes.
Since the 80's, however, the average Americans' income has stayed the same, and they have had to contend with rising costs of housing, education, food, transportation, and childcare. If you are already rich, it is easy to invest your money and earn even more money. But if you don't have very much right now, it's hard to even pay your bills, not to mention get ahead and save money. The United States is one of the richest countries in the world, we can do better than that!
The US needs its wealthy people and corporations to pay their fair share in taxes in order to empower and protect the public, and pay down the national debt.
Wealthy People
We should create a new tax brackets for millionaires and 10-millionaires - the current top bracket of $250,000 is too low - Republicans are right when they say $250,000 is not that rich. The income tax on money made over $1M would be 50% and over $10 million, the max rate would be 55%. Capital gains should be treated the same as wages for tax purposes - no longer should hedge fund managers only pay 15% of their millions/billions in income. We should also pay Social Security tax on all income - not just the first $100,000. With the money from these taxes, the government could expand the Earned Income Tax Credit (EITC), which has been the US's number one poverty-fighting program for a while. This would help regular people pay their bills, and also stimulate the economy - the money would get spent quickly.
Corporations
The US officially has a corporate tax rate of 35%. However, the corporate tax code is so full of loopholes that the actual rate is closer to 17%, and almost one third of Fortune 500 companies pay no tax in a given year. Here's a graph showing US corporate tax income over time:
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| US companies are paying less in taxes every year... |
In fact, sometimes they take advantage of so many loopholes/giveaways that the government owes them money! The US has a doesn't tax overseas profits until they are "repatriated" or paid back to the US. Companies often create subsidy corporations legally based overseas, and then don't ever repatriate profits, thus avoiding the tax entirely! This also creates a huge incentive to outsource jobs to foreign countries - why hire here if you could just outsource the job to a foreign country and pay no tax on the profits?
Corporations take just as much advantage of public services and infrastructure as people do, and it is unfair that they do not help pay for them. The solution to this is simple: First, lower the corporate tax rate slightly to stay competitive - say 25-30%, but close ALL the loopholes/credits/exemptions. Second, tax all American companies profits the same - whether it's made in the US or abroad.
The end result of all of this would be a fairer tax code, more tax revenue for the government, decreased outsourcing, and stimulating the economy (through expanding the EITC and increased govt. spending with the tax money).
What do you think? Do you think this is a good plan? What would/wouldn't work? Let me know in the comments.
Read Part 2 of my Progressive Values series here.
-Cy
I am a little bit concerned about your idea for charging a capital gains tax at the same rate as regular income. This would mean that investors might be less likely to take entrepreneurial risks. I also wonder how this would effect retired people who may make a bit of money off of their investments, but use the money to pay for high healthcare costs and increased living costs that come with old age. I'm not sure but those are two things to consider. I also realize though that to not charge the superwealthy the same income rate allows the rich to get richer. So what do you think? Is there a way to protect the true investors and the elderly?
ReplyDeleteThanks for commenting! It's been like a year since anyone else has...
ReplyDeleteAs for investors taking entrepreneurial risks, I think you're confusing capital gains with business income. A capital gains tax is a tax charged on capital gains, the profit realized on the sale of a non-inventory asset - most commonly from selling stocks, bonds, precious metals or property.
If I create a business and sell inventory, I pay business income tax, not capital gains - so raising taxes on capital gains won't affect my behavior.
You make a good point about retirees, though. Maybe IRAs could be taxed at the capital gains rate of 15% up to a certain amount of money. This would help retirees pay their bills while still raising taxes on the superwealthy.