Most readers are aware of the report published by ProPublica revealing the “true tax” rate of 25 billionaires to be a tiny fraction of the rate paid by the rest of Americans. Details emerge on how well-known magnates like Bezos, Buffett and Gates utilize methods unavailable to the majority of tax payers to pay only 0.1–3.5% of their annual income, compared to the 15–30% rate most American workers pay in federal income tax.
Equally troubling is the response of prominent elected representatives, entrusted to enact a fair system of taxation, to this matter of public interest. Senate GOP Leader Mitch McConnell called for the whistleblower to be “hunted down and thrown into jail,” in a bizarre non-sequitur that attempted, but failed, to draw parallels between this leak and the targeting of conservative groups by the IRS under the Obama administration.
Republicans are accusing the IRS of having political motivations to leak this information in support of a Democrat-sponsored tax increase.
President Biden’s White House press secretary Jen Psaki reassured the oligarchs, “Any unauthorized disclosure of confidential government information by a person of access is illegal and we take this very seriously,” before listing a number of federal law enforcement agencies, including the FBI, which the White House had referred the case to.
She declined to comment on any information in the ProPublica report, but flippantly reassured reporters that unspecified Biden proposals will address the problem. It is unclear which proposals she was referring to. Biden’s tax plan promises to raise taxes on Americans earning more than $400,000, but offers no apparent solution to the loopholes exploited by these billionaires, many of whom funded his campaign lavishly.
Some members of congress, led by Senators Bernie Sanders and Elizabeth Warren, have proposed a wealth tax intended to address the disparity in taxation between people who can employ armies of lawyers and accountants to their cause, and the rest of the country. However well-intentioned, a wealth tax has problems both in theory and practice. Wealth appraisal is notoriously subjective to bias, discrimination and error — and it’s often difficult to prove which. Several European countries have implemented wealth taxes, but they have been generally unsuccessful in effectively taxing the wealth of billionaires due to the expense and utter futility of attempts to track and evaluate their equity.
It is much more expensive for governments to target billionaires for taxes than it is to target citizens with less legal resources, and game theory as well as history both indicate that is exactly how a wealth tax would function in practice. The more complex a tax code becomes, the more loopholes exist therein, and expensive tax consultants would continue to be employed by billionaires to avoid paying their ‘fair share’ (despite what politicians championing their cause would assure us). But the wealth tax would still fall hardest on Americans who cannot afford to insulate themselves against it, especially those daring to attempt to climb the economic ladder. Additionally, there is some legal precedent in the US that a wealth tax would be unconstitutional.
In a more pointed effort, Democrat Representative Tom Suozzi from New York has floated the idea of a one-time wealth tax on individuals with net worth above $50 million, which would incur large payments from the billionaires in the ProPublica report, and raise approximately $450 billion in revenue.
The regressive “true tax” is definitely a problem, one there is no easy solution for. Acknowledging the disparity as a problem is better than ignoring it and attacking the whistleblower, which the leaders of both parties seem content to do. Open conversations and civil discourse in a representative government is required to figure out how to create a fair system. While our esteemed leaders work diligently to solve the problem during these trying economic times, perhaps it would be appropriate for all Americans to pay the same tax rate as billionaires in the meantime.