Time we make billionaires pay their fair share

A fundamental question in politics is “which side are you on?”

In his State of the Union address, President Joe Biden called on Congress to pass a “billionaire minimum tax,” which would ensure that billionaires don’t pay a lower tax rate than ordinary working people. And what is the Republican position? Well, here’s a clue.

In their first act running the new 118th Congress, House Republicans unanimously voted to defund Biden’s efforts to help the IRS crack down on wealthy tax cheats. Soon, they’ll hold hearings on a quixotic bill to abolish the IRS and hit working Americans with a heavy sales tax.

So which side are these lawmakers on? In these acts, at least, they’re siding with dynastic billionaires, global oligarchs and the nation’s wealthiest taxpayers.

First, let’s look at what happens without a strong IRS.

Dismantling the IRS, whether by cutting its funding or abolishing it outright, is a gift to the ultra-wealthy for whom U.S. taxes are already becoming voluntary. Their tax lawyers, accountants and wealth managers have outgunned the IRS in their ability to create complicated tax dodges involving trusts, shell companies and offshore banks.

A 2021 exposé by ProPublica found that more than half of the 100 wealthiest U.S. billionaires use a complex trust system to avoid U.S. estate taxes — the only U.S. levy on inherited wealth, which only kicks in for estates starting at $11.7 million.

In our 2022 study, “Billionaire Enabler States: How U.S. States Captured by the Trust Industry Help the World’s Wealthy Hide Their Money,” Kalena Thomhave and I dug into how billionaires are exploiting laws at all levels of government to hide wealth and dodge taxes. And new investigative reporting keeps piling on.

The New Yorker just helped uncover how descendants of oil tycoon J. Paul Getty deployed Nevada-based trusts to avoid $300 million in California taxes — and probably billions in federal taxes — over the last decade. And last year, Florida amended its laws governing family trusts at the behest of the Waltons, America’s wealthiest family, to effectively place assets outside the reach of taxation and accountability for a millennium.

No wonder the United States, as the Pandora Papers revealed, is now the number one destination for financial secrecy, surpassing Switzerland and the Cayman Islands as a jurisdiction of choice for global oligarchs and billionaires looking to hide their often ill-gotten gains.

We need an IRS that can follow this money and shut down the worst abuses. But for over a decade, the agency has been targeted for budget cuts and layoffs. The number of millionaires and billionaires audited by the agency has shrunk as its capacity to shut down the shenanigans of the ultra-wealthy has shrunk.

Defunding Biden’s efforts to shore this enforcement up — or abolishing the IRS entirely — would have the singular effect of helping the wealthy skate by. So where would federal revenue come from?

Well, that’s where you — and the GOP’s flat tax proposal — come in.

The so-called fair tax would establish a 30% sales tax, collected by states, on everything we buy — homes, health care, cars, groceries, college tuition — while eliminating taxes on wealth, capital gains and high incomes. An analysis of an earlier version of the proposal found it would increase tax obligations for the bottom 80% of U.S. households while reducing them for the top 20%. That means it’s a big tax hike on the middle class and senior citizens. It would increase prices for everything during a period of inflation, all to let the wealthy off the hook.

We need a progressive tax system where billionaires pay their fair share the way the rest of us are expected to. And for that, we need a healthy IRS. Whose side are you on?