Taxes have always been a major political issue in America. We love to hate taxes. From “no taxation without representation” in 1776, to “read my lips..no new taxes” in 1988, to the current administration’s fake tax cuts in 2017, taxes have been the controversy of choice for politicians to demagogue. They can always fire up the voters with calls to “tax the rich” or to “give back your hard earned money.”
Sensible people understand that taxes are the dues we pay to belong to a civilized society. Taxes are essential to a stable government, and stable government services are essential to the well being of all of us. Recently I ran across a website with a new spin on this obvious and sensible theme. It is written by wealthy people who believe they should pay more in taxes. It is called Patriotic Millionaires.
The website uses plain language and common sense to debunk many common myths about taxes. On its “Patriotic Millionaire University for citizens” it has short articles on “Tax Basics.” As Erica Payne, founder and president, says in the introduction, “Because voters think the tax code is complicated, politicians think it’s easy to lie about. They’ve been doing it for years.” Tax Basics refutes these frequent lies. Here are a few examples.
Makers vs Takers
Conservatives claim the wealthy investor class are “job creators.” If you cut taxes on the wealthy they will invest the money and create jobs and economic growth. Morris Pearl, Chair of the Patriotic Millionaires, and a former Wall Street executive, says this is “completely, totally, 100% wrong.” He says on the website,
“Sure, you can call some rich people that built businesses from the ground up job creators, but that’s a small, small minority of those of us given that label. The way most rich people get rich and stay rich, investing, has nothing to do with job creation. It’s simply not true that investing in the stock market creates jobs. The only thing that does create jobs is consumer demand for products and services, not my investment dollars.”
As I have pointed out in prior articles, a truly prosperous, sustainable economy is built from the bottom up. It is the productive activities of farmers, mechanics, carpenters, store owners, truck drivers, cooks, etc., that actually create economic “value”. When these people do well the overall economy does well. Yes, entrepreneurs who create businesses are part of this creativity. But Wall Street speculators and trust fund babies are not. The economy does well when ordinary workers have enough money to buy stuff!
The “Death Tax”
Economist Robert Reich, writing in Common Dreams, reminds us that around 60% of wealth (that is ownership of assets) in our country is inherited. The Patriotic Millionaires tell us that “the new Republican tax code requires working Americans to pay up to 37% of their income in taxes, but it allows the children of millionaires to inherit up to $22,400,000 without paying a single penny in taxes.”
Estates pay no tax on amounts under $11,200,000 for individuals or double that for married couples This means if you and your spouse inherit $22,400,001 you only pay 40 cents total in estate tax (40% of the amount over the exemption). Obviously, the estate tax does not rob farmers and small business owners of their hard earned dollars as often claimed by conservatives.
Capital Gains Scam: Why Taxes Don’t Affect Investment
People with income from capital gains from their investments pay a lower rate of taxes than if that income came from wages from working. Conservatives claim this is necessary to encourage investment in the economy. Patriotic Millionaires say this is “total nonsense...rich people are going to invest their money regardless of tax rate.” They explain this with simple reasoning,
“Think about it. If you have a million dollars and you’re deciding what to do, you could:
A. Keep your million dollars in cash. At the end of the year, you’d still have a million dollars, and you would owe no taxes at all.
B. Invest your million dollars, and make more money (whatever the tax rate is). Even taking taxes and the volatility of the market into consideration, you’re still extremely likely to make a significant amount of money from your investment. A higher tax rate may mean you don’t make quite as much, but it’s still better than making nothing!
Who Pays and Who Doesn’t?
Tax fairness, not tax rates, are the real issue. The Patriotic Millionaires point out that “Our tax code is deliberately designed to reward people who already have money over people who work for a living.” Corporate profits have never been higher, and corporate taxes have never been lower. The share of taxes paid by business vs individuals has been declining for decades. They say,
“The question at the heart of our tax system is – how do we divide up the tab in a way that’s fair, so that everyone is doing their part and there isn’t too much of a burden on one group or another?
The sad truth at the heart of our tax code is that it gives huge incentives to corporations and people earning their money without working (who happen to almost exclusively be wealthy), and things are just getting worse. Last year’s massive tax bill did a lot of things for a lot of people, but almost all the benefits handed out were concentrated in three of the four [tax payer] baskets: corporations, passive income earners, and those inheriting millions.”
The Patriotic Millionaires also debunk misleading conservative sound bites about tax code simplification, common tax loopholes, and the Trump tax “cuts.”
It is a must read for informed taxpayers. As I have suggested in the past, PEOPLE NEED TO BE INFORMED AND NOT JUST OPINIONATED.