We should support work, not wealth
The top tax rate on the main sources of investment income is only about half the top rate on wages and salaries.
Did you know that an emergency room nurse tending COVID-19 patients or a truck driver who delivers the food and essential goods that sustain us even during a deadly pandemic pay more in taxes than billionaires living off Wall Street investments? That’s because our tax code unfairly privileges wealth over work. The top tax rate on the main sources of investment income (20%) is only about half the top rate on wages and salaries (37%).
Most of us live day-to-day on wages from a job. But the super-rich let their money do their work for them. Their income is largely in the form of investment gains: the rising value of their stocks, bonds, real estate, private businesses and more. When they sell one of those investments for more than its purchase price, that’s called a capital gain. It’s capital gains — and a related payment to stockholders known as dividends — that get the nearly half-off tax-rate discount.
That’s how billionaires have benefited from obscene gains in their wealth during this pandemic, while millions of regular working people lost jobs, small businesses, income, health care and much more. In Pennsylvania, 17 billionaires more than doubled their wealth during the pandemic; their wealth grew from $28.4 billion in March 2020 to $61.4 billion through Aug. 17. Meanwhile 3.3 million Pennsylvanians lost jobs, many of them losing health care in the process.
Not only are the rich getting richer while millions of the rest of us are just getting by, but the wealthy get to keep their wealth tax-free thanks to stepped-up basis, a loophole that allows them to avoid taxation on a whole lifetime of investment income.
Another way our rigged tax system rewards wealth over work is how little it taxes the corporations the rich own through their shareholdings. The wealthiest 10% of Americans own almost all the nation’s corporate stock. Last year 55 huge firms — including FedEx, Nike and Salesforce.com — paid zero federal income taxes despite combined profits topping $40 billion. Multinational companies dodge taxes by hiding profits and shipping jobs offshore.
That reward comes on top of the 2017 tax law that already gave corporations a huge discount on their taxes, from 35% down to 21%. Under the same law, millionaires got big tax breaks while average families got much less. In 2020, the richest 1% of Pennsylvanians got an average tax break of $49,510, while middle-income people got an average reduction of $770.00.
President Joe Biden and his allies in Congress want to start rewarding work and not just wealth. Their reforms would make those making more than $1 million a year pay the same tax rate on their investment income as they do on their wages. They would close the steppedup basis loophole for capital gains over $1 million. And they would curb offshore corporate tax dodging and raise the corporate tax rate to ensure big companies pay a fairer share and keep good-paying jobs here. No one making less than $400,000 a year would pay higher taxes under this plan.
The revenue raised from fairer taxes on the rich would help working families by making health care, child care and education more affordable and providing tax credits to working families so they have more money to spend and save.
Polls consistently show Democrats, independents and even Republicans want the rich and corporations to pay their fair share and that money used to improve working family lives.
The rich and the politicians they fund are attacking these reforms with phony arguments. None of us should be fooled.
As people of faith we believe that all persons are created in the image of God and deserve to live in safety and health, with dignity and respect. Our country has more than sufficient resources for all, if all contribute fairly to the maintenance of our economy so all can live the abundant life that we believe God wants for everyone, not just the wealthy.
We have a historic opportunity this year to fix our tax code so that the wealthy and corporations pay closer to their fair share and we have enough money to invest in the needs of working families. We urge Pennsylvania’s members of Congress to support this effort.