This Tax Day, Reform Was Busting Out All Over
Congressional allies were unveiling a variety of plans to ensure the rich paid more
Tax Day this year (April 15) was a warm spring day and progressive tax reform was busting out all over.
Americans for Tax Fairness (ATF) and its partners showcased a lot of it at a press conference and in dozens of visits to congressional offices that day. Earlier this year, ATF helped set the table for reform with the release of its ambitious policy agenda, which lays out some basic principles and offers concrete legislative solutions for raising $10 trillion in new revenue over the next decade.
Sen. Chris Van Hollen (D-MD) spoke at the press conference and used the opportunity to unveil the Millionaires Surtax. Co-sponsored in the House by Rep. Don Beyer (D-VA), the measure would levy a 10% tax on income over $2 million per couple ($1 million per individual). Importantly, it would apply to both so-called “ordinary” income–what for most people is mostly wages–as well as investment income that is normally taxed under a different (and more generous) system. The tax would raise more than $630 billion over 10 years, revenue that could be used to lower costs for all the non-millionaires out there.
This week or soon after the ranking Democrat on the tax-writing Senate Finance Committee, Ron Wyden (OR), will release a raft of progressive tax reforms that touch on topics ranging from life insurance to abusive trusts, the carried interest loophole to derivatives regulation.
He also has a plan to quadruple the current 1% tax on stock buybacks. The buyback tax was created by former President Joe Biden and a Democratic congress to raise revenue and to discourage the practice of share repurchases, which waste corporate cash enriching already wealthy stockholders. That’s money that could instead be used to boost worker pay or invest in the business.
The same law that created the buyback tax–the Inflation Reduction Act of 2022–also restored funding for the Internal Revenue Service, which had been purposely stripped of resources over the previous decade by conservative politicians. That dismantling of the IRS resulted in $600 billion a year lost to tax evasion, mostly by the wealthy, plus long waits for refunds and phone responses and other poor service for honest taxpayers.
The new funding began to reverse those patterns–more tax was collected from the rich and corporations while customer service improved–but the foes of proper tax administration were not giving up so easily. Over the past few years, congressional Republicans have clawed back almost all of the restored funding, leaving the IRS back in its depleted condition.
Four senators–Tim Kaine (D-VA), Angus King (I-ME), Elizabeth Warren (D-MA) and Sheldon Whitehouse (D-RI)–now have a plan to make the IRS robust again. It would invest $83 billion in the agency that one estimate predicts would generate nearly a trillion dollars in increased revenue–a 13-1 return.
Another way the wealthy avoid taxes besides cheating is through clever exploitation of loopholes. That’s especially true of the estate tax, the only federal curb on the accumulation of dynastic wealth. (Despite relentless propaganda to the contrary, the estate tax poses no threat to family farms or small businesses.) Attorneys and accountants have over the years devised several kinds of special trusts that allow the superwealthy to reduce the tax or avoid it altogether. Senator Wyden and Sen. Patty Murray (D-WA) have a proposal to close this loophole by making trusts pay an annual withholding tax that is eventually credited against any estate tax due.
This spring of tax reform comes on the heels of several proposals revealed earlier in the year to better tax billionaires. More ideas will keep popping up because the American people are tired of the ultrarich and huge corporations dodging their fair share of tax.