By Will Caraccio
Currently in the United States, 1% of the population owns roughly 40% of the nation’s capital. With such an egregious accumulation of wealth at the top of the socioeconomic spectrum, one immovable fact comes to light: for all of our nation’s citizens to prosper, higher incomes must pay progressively higher taxes. If enacted, a truly progressive taxation system would not only lessen the socioeconomic disparities present in the country, but also would generate additional revenue that the federal government could funnel back into the economy to stimulate growth, or use to replenish dwindling welfare programs such as Social Security and Medicare. Yet, while a degree of progressive taxation does currently exist in the US, so too exist a panoply of tax expenditures (tax breaks in the form of exemptions, deductions, or credits to select groups) that privilege the rich. Exacerbating financial inequality by allowing the rich to pay disproportionately low taxes, these tax loopholes contribute to the staggering wealth disparities that plague the United States.
One such tax expenditure is the tax break applied to capital gains taxes, which act on income gained from stocks, bonds, and real estate—all of which predominantly serve the wealthy. In fact, the richest 1% of taxpayers receives 71% of all capital gains, while the bottom 80% of taxpayers receive only 10% of capital gains. As a result of these capital gains tax breaks, workers who get their salaries from wages often pay a higher effective tax rate than enormously wealthy individuals like Mitt Romney and Warren Buffet, who make most of their income selling stocks and bonds.
Another federal tax reduction which has contributed to the grotesque wealth inequality in the US is the weakening of the estate tax, which is the single most progressive tax in the U.S. federal tax code. While the 2009 Obama-era estate tax imposed taxes on only the wealthiest three out of every 1,000 estates, since then the estate tax has been significantly diminished, once again contributing to economic inequality and losses in federal revenue.
Perhaps the largest factor in the growing American wealth gap is the appalling corporate tax code, which has steadily declined after reaching its peak in the late 1960s. While providing a substantial portion of the federal revenue in the past, corporate tax now only constitutes 7% of the national income. Just this year, Congressional Budget Office data showed that the effective corporate tax rate dropped to 12.1%, the lowest recorded level during the past 40 years. While corporations such as Facebook and Amazon make billions in annual profits, in 2018 they paid $0 in corporate income taxes. Facebook in fact reported that it was owed $268 million from the government, taking into account the massive deductions and credits it was afforded by the US tax code (Center for Public Integrity).
While immensely wealthy individuals and corporations continue to capitalize on the uneven United States tax code, over 10% of Americans live in abject poverty, living paycheck to paycheck. It’s time that we stop putting a price tag on human life and start treating it as it’s worth: priceless.