The Times Australia
The Times World News

.
The Times Real Estate

.

'Tax the rich'? Democrats' plans to make the wealthy pay a little more will barely dent America's long slide from progressive taxation

  • Written by Gabriel Zucman, Associate Professor of Economics, University of California, Berkeley
'Tax the rich'? Democrats' plans to make the wealthy pay a little more will barely dent America's long slide from progressive taxation

Demanding tax increases on the rich is back in fashion – both in the corridors of the House of Representatives[1] and on the red carpet of the Met Gala[2].

The House Ways and Means Committee outlined plans on Sept. 13, 2021, to move the top marginal income rate up a couple of notches to 39.6% and to introduce a 3% surtax on incomes above $5 million[3]. That proposal would fall short of calls to really “tax the rich,” as Rep. Alexandria Ocasio-Cortez’s dress demanded[4] at a glitzy New York bash just hours later.

Tax policy is deemed progressive if the chunk of income taken increases with the income of the individual – so wealthy Americans would pay a larger proportion of their income than poorer ones. With a regressive tax policy, lower earners pay a larger percentage of their earnings in tax than wealthier ones. The committee’s plan would roughly put tax progressivity back to where it was just before President Donald Trump signed off on Republican tax cuts in 2017[5].

That would still be far below the level of progressivity the United States embraced in the middle of the 20th century – when wealthier individuals paid a much higher share of their income in taxes than the poor.

In 1950, when looking at all federal, state and local taxes, the top 0.01% of earners paid almost 70% of their income in taxes[6]. In the postwar decades, corporate profits[7] – the main source of income for the rich – were subject to an effective corporate tax rate of 50%. Meanwhile, the rich were subject to high tax rates on wages, dividends, interest and income from partnerships.

The progressivity of the U.S. tax system has dramatically declined over the past seven decades. The upshot is that for most income levels the U.S. tax system now resembles a flat tax that becomes regressive at the very top end, meaning the super-rich pay proportionately less. Today, virtually all income groups pay roughly 28% of their income in taxes[8] – except for the 400 richest Americans, who each own more than $2 billion in wealth today and pay around 25% in taxes.

Working-class and middle-class Americans pay a substantial amount of taxes because of payroll taxes, which are high and barely affect the rich, and state and local sales taxes, which are regressive – they take a bigger chunk out of a smaller wage than out of a large income. Even households that pay no federal income tax[9] because of low earnings hand over a percentage similar to that of wealthier households, because of these other taxes.

The super-rich’s low tax rates of today are in part aided by the collapse of federal corporate taxation[10]. In the 1950s, 5% to 7% of national income came from corporate taxes. By 2018, that figure had fallen to just 1.5%.

The effective tax rate collapses for billionaires further because they can avoid reporting individual income by instructing their companies not to pay dividends and holding on to their shares without realizing their gains.

The proposal unveiled by House Democrats would increase taxes on millionaires significantly. But it would largely leave billionaires off the hook, despite the explosion of their wealth[11] during the pandemic. More ambitious proposals in the Senate would tax their unrealized capital gains[12]. In our view, this would be a bold addition that would help the United States reconnect with its tradition of tax justice.

[Over 110,000 readers rely on The Conversation’s newsletter to understand the world. Sign up today[13].]

Read more https://theconversation.com/tax-the-rich-democrats-plans-to-make-the-wealthy-pay-a-little-more-will-barely-dent-americas-long-slide-from-progressive-taxation-168057

The Times Features

How to Protect Your Garden Trees from Wind Damage in Australia

In Australia's expansive landscape, garden trees hold noteworthy significance. They not only enhance the aesthetic appeal of our homes but also play an integral role in the local...

Brisbane Homeowners Warned: Non-Compliant Flexible Hoses Pose High Flood Risk

As a homeowner in Brisbane, when you think of the potential for flood damage to your home, you probably think of weather events. But you should know that there may be a tickin...

Argan Oil-Infused Moroccanoil Shampoo: Nourish and Revitalize Your Hair

Are you ready to transform your hair from dull and lifeless to vibrant and full of life? Look no further than the luxurious embrace of Argan Oil-Infused Moroccanoil Shampoo! In a...

Building A Strong Foundation For Any Structure

Building a home or commercial building can be very exciting. The possibilities are endless and the future is interesting. You can always change aspects of the building to meet the ...

The Role of a Family Dentist: Why Every Household Needs One

source A family dentist isn’t like your regular dentist who may specialise in a particular age group and whom you visit only when something goes wrong. A family dentist takes proa...

Benefits of Getting an Online Medical Certificate

Everyone has experienced it. Rather than taking a break, you drag yourself to the doctor's office, where you have to wait in lengthy lines, and then you have to hurry to get that...

Times Magazine

"Eternal Nurture" by Cara Barilla: A Timeless Collection of Wisdom and Healing

Renowned Sydney-born author and educator Cara Barilla has released her latest book, Eternal Nurture, a profound collection of inspirational quotes designed to support mindfulness, emotional healing, and personal growth. With a deep commitment to ...

How AI-Driven SEO Enhancements Can Improve Headless CMS Content Visibility

Whereas SEO (search engine optimization) is critical in the digital landscape for making connections to content, much of it is still done manually keyword research, metatags, final tweaks at publication requiring a human element that takes extensiv...

Crypto Expert John Fenga Reveals How Blockchain is Revolutionising Charity

One of the most persistent challenges in the charity sector is trust. Donors often wonder whether their contributions are being used effectively or if overhead costs consume a significant portion. Traditional fundraising methods can be opaque, with...

Navigating Parenting Arrangements in Australia: A Legal Guide for Parents

Understanding Parenting Arrangements in Australia. Child custody disputes are often one of the most emotionally charged aspects of separation or divorce. Parents naturally want what is best for their children, but the legal process of determining ...

Blocky Adventures: A Minecraft Movie Celebration for Your Wrist

The Minecraft movie is almost here—and it’s time to get excited! With the film set to hit theaters on April 4, 2025, fans have a brand-new reason to celebrate. To honor the upcoming blockbuster, watchfaces.co has released a special Minecraft-inspir...

The Ultimate Guide to Apple Watch Faces & Trending Wallpapers

In today’s digital world, personalization is everything. Your smartwatch isn’t just a timepiece—it’s an extension of your style. Thanks to innovative third-party developers, customizing your Apple Watch has reached new heights with stunning designs...

LayBy Shopping