Viewpoint: Tax the rich to cut national debt, inflation

Viewpoint: Tax the rich to cut national debt, inflation

Regardless of whether you see Donald Trump’s tax returns as evidence of tax cheating and fraud or as financial wizardry (that is, sleight of hand) in capitalizing on (or fabricating) loopholes so he can pay zero or $750 tax on millions of dollars in income (hello!), Trump is the poster child for the need for tax reform.  That is, a fairer (not flatter) tax code and a just, efficient tax collection system.

And yet Kevin McCarthy said his first act as speaker of the House would be to repeal the $80 billion funding for the 80,000 IRS agents. Second is to go after Medicare and Social Security under the aegis of reducing the national debt and mandating spending “within means.”

But those IRS agents are necessary to recover the estimated $1 trillion in unpaid taxes each year by the top 1%. It’s so much easier to go after the tips earned by waiters and let billionaires skate away paying an average of 8%, half the rate that firemen and teachers pay. Let’s see, $80 billion in spending over 10years  to recover $1 trillion a year seems like a pretty good ROI.

As for Social Security, the better solution is to raise the cap from $147,000 in order to adequately fund it and preserve this lifeline for millions of retirees. If the cap were raised or even eliminated, then not only would Social Security be adequately funded, but the rate could actually be lowered for everyone.

Republicans, who had no complaint with the national debt when Trump exploded it by $7.4 trillion ($2 trillion due to the Trump Tax Scam of 2017 and billions because of then Treasury Secretary Mnuchin’s profligate dispensing of Covid relief) are back to using it to handcuff the administration from spending on everything from infrastructure to climate action to public health and education; they even want to cut defense spending by $75 billion. They claim that government must live within its means, just like families do. But families take a mortgage to buy a house, a loan to buy a car, while businesses take loans to start or expand – an investment in the future. It should be the same with government spending.

This is borne out in the fact that Biden’s economic policies – designed for stable growth and sustainability – have resulted in record jobs creation, the lowest unemployment rate in 50 years, the first real gains in income since President Reagan, and a record $1.4 trillion reduction in the budget deficit in a single year. Very simply, when you put people to work, they pay taxes instead of taxing the social safety net, such as it is.

The idea behind raising interest rates to stem rising inflation is to reduce demand. But raising interest rates on mortgages and auto loans in order to control inflation is like a tax that becomes a barrier to families clawing their way into the middle class.

Still, the Republicans seem intent on continuing to beat the drum for the failed and repeatedly discredited “trickle down” theory of lowering taxes on the wealthiest and corporations, which is supposed to unleash “investment.” Instead, their spending is what fuels inflation. Indeed, tax policy that so favors the rich and well-connected is the “trickle down” of inflation – the wealthiest have no problem paying $1 more per gallon of gas or milk, but push up prices for everything and everyone else.

Raising (and collecting) taxes on the uber rich would not only temper demand that is driving inflation but give the government the resources to continue to grow the economy sustainably, without adding to the national debt.

Republicans also push for “flat tax,” which is the “skin in the game” theory of economics. (The fact that the lowest earners, the true “creators,” are also the ones with the most sweat equity doesn’t seem to factor.). This is a crock. Let’s say you set a “flat tax” of 10%: for a family making $20,000, struggling to pay rent, that $2,000 is serious money, but 10% on $1 billion would leave $900 million and hardly be missed.

Moreover, flat tax on what? Billionaires already pay hardly any “income” tax because they don’t “earn” income –they take out loans on anticipated appreciated value of their stock options and get to deduct the interest from taxes or, like Trump, they manage to contrive enough losses to erase revenue.

The more rational approach to the “skin in the game” is reforming the AMT (Alternative Minimum Tax), which seems not to be working very well if Trump could evade paying taxes altogether even as he “earned” millions.

Biden has achieved something comparable to the AMT for corporations: as part of the Inflation Reduction Act, Biden was able to make good on the global agreement to have a 15 percent minimum tax on corporations.

There also should be a transaction tax on stock trading, which would have the added benefit of inserting some stability and long-term productivity to the market.

Raising tax rates on the uber rich would not only lower the budget deficit and pay down the national debt, but give the country vital resources to invest in the future.


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