The Trump-GOP tax cut of $1.5 trillion in December 2017 provided the latest payoff to the wealthy. It lowered the top tax rate, slashed the corporate tax rate from 35 to 21 percent, and doubled exemptions from the federal inheritance tax to $22 million per married couple. Although not all of the tax benefits went to the richest Americans, the vast bulk of them did. An estimated 83 percent of the households among America’s wealthiest one-tenth of one percent will receive a tax break, with an average benefit of $193,380 per year.
Why did Americans support this new raid upon the federal treasury that enriches the nation’s millionaires and billionaires?
Actually, they didn’t. A Gallup poll of April 2017 found that 63 percent of Americans believed that upper income people paid too little in taxes. That same month, the Pew Research Center reported that 60 percent of Americans were bothered ‘a lot’ by the fact that “some wealthy people don’t pay their fair share” of taxes. In October 2017, a Reuters/Ipsos poll discovered that three-quarters of Americans thought that the wealthiest Americans should pay more in taxes. Furthermore, surveys taken at the time by US polling agencies consistently found that public support for the regressive Trump-GOP tax legislation languished in the mid-20s.
A key reason why most Americans favor taxing the rich is the traditional one: the wealthiest have the greatest ability to shoulder the nation’s tax burden. After all, America’s richest one percent now possess nearly 40 percent of the nation’s wealth – almost twice the wealth held by 90 percent of the public. Indeed, it’s hard to imagine why they need to add anything to the enormous wealth they have already amassed. For example, Charles and David Koch, heirs to a vast fortune and, currently, the leading champions of tax-cutting and other rightwing schemes, have a combined net wealth of $120 billion. If they simply stopped raking in additional income and, instead, each spent $1 million per day, they could continue doing that for over 164 years.
Conversely, nearly half of all American households cannot afford the basics of existence like food, housing, and medical care. Why should they be taxed heavily – or at all – to fund public facilities and services that the richest Americans, with their unprecedented wealth, can easily afford to cover?
Another reason to raise taxes on the rich is that it’s good for the economy. Of course, this contradicts the unverified contention of their cheerleaders that such taxation leads to job loss and economic collapse. But, in fact, as even some leading businessmen have pointed out, taxing the rich to fund public programs increases investment, boosts productivity, and creates more and better jobs. Following World War II, when the wealthiest Americans had a 91 percent tax rate and top federal tax rates on stock dividends ran between 70 and 90 percent, America experienced an enormous economic boom. Another surge of rapid economic growth occurred in the late 1990s, following federal tax hikes on wealthy investors. Only after President George W Bush pushed through sharp cuts in taxes for the wealthy did the American economy slow and, then, collapse in the Great Recession.
Much the same pattern has emerged in the states. In 2012, Kansas slashed its tax rates, while California raised taxes on its wealthiest residents. Five years later, the Kansas economy was on life support, while California was undergoing the strongest economic growth in the nation.
Not surprisingly, states are turning increasingly to enacting a “millionaires tax,” and the Trump-GOP tax cuts for the rich have become a potential political liability for the Republicans in the 2018 congressional elections.
This article has been excerpted from: ‘Let’s Tax the Rich’.