Billionaires’ income tax would make them pay their fair share
Opinion: Some assume there is no solution to the gap between the ultra-rich and the average American. There is: The billionaire income tax.
Today, 11 Arizonans have nearly as much wealth like all of the bottom half of households in our state. Yet our tax laws have not kept pace with this growing income inequality and do not effectively ask the very wealthy to contribute their fair share.
In reality, Analysis by ProPublica of IRS data showed that in some years the wealthiest avoided paying a single penny in federal income tax.
Most taxpayers owe tax on the income they accrue on an annual basis; they pay their taxes at source, as they receive their salaries.
But for the wealthiest, wage income is only a fraction of their economic earnings.
The ultra-rich keep getting richer
The majority of their income comes from capital appreciation, that is, the increasing value of the property they own. Under federal law, this economic gain is not taxed until the property is sold, and it may escape income tax if the property is held until death.
By deferring tax on this income until the asset is sold, the wealthiest can reduce their effective tax rates, and this benefit is in addition to the already reduced rates (capital gains) applicable to the sale of many assets. .
At the same time, billionaires can borrow against the value of these assets – often at very low rates – and use that borrowing to make investments that further increase their wealth.
Too often, we assume that there are no solutions to growing income inequality and the growing power imbalance between ultra-rich and average Americans.
But for this problem, Congress has already proposed a viable solution.
How the billionaire minimum tax would work
the Billionaires Minimum Income Tax would ensure that the ultra-rich contribute their fair share. The tax only applies to billionaires or those whose income has exceeded $100 million in the past three years.
The legislation would impose a gains tax on publicly traded shares based on the change in the value of the shares during the tax year.
For assets that are private (and therefore harder to value), the Billionaire Minimum Income Tax imposes the tax retroactively.
Arte Moreno is Arizona’s billionaire which owns the Los Angeles Anaheim Angels. Under current law, his investment in the Angels can increase in value tax-free until Moreno sells the team, and if he were to die before selling the team, that increased value would escape completely. to income tax.
Under the Billionaires income taxwhen Moreno eventually sells the team, he will pay tax on the investment gain and interest representing the value of his deferred tax payments.
Congress should make them pay their fair share
Arizonans and working-class families across the country have long felt the economy isn’t working for them. Federal tax law provides benefits to the ultra-rich that are not available to middle-class earners.
We should push Congress to change that.
When all American taxpayers, including the ultra-wealthy, pay their fair share, we can fund investments that will improve economic outcomes for everyone. We can adequately fund schools, provide support for families facing crippling childcare costs, and ensure rural Arizona has access to broadband and the employment opportunities that access creates.
But to do all of this, Congress must act.
Erin Scharff is a professor of law at the Sandra Day O’Connor College of Law at Arizona State University. Join her at [email protected].