There are large and growing disparities in wealth in the U.S. There are several ways to ensure the super-wealthy pay their fair share of taxes. The People’s Union advocates for fairer tax policies at the federal level. While income tax revenues continue to sharply increase, corporate tax revenues have remained fairly stagnant over the past decade and a half. Income tax brackets at the top of the earning scale should be more progressive, and a flat tax on corporations would ensure that all companies pay their fair share of taxes. We also are in favor of eliminating certain taxes that we deem unfair. Tax reform should ensure that the most vulnerable Americans can enjoy a measure of financial security, while those who have thrived financially in society contribute to the well-being of all through the taxation system.
Wealth Disparities Grow
There have been large disparities in wealth accumulation over the past 20 years, leading to a growing gap in wealth between the 1% and average Americans. This wealth gap also encompasses differences in wealth accumulation between White Americans and Latino/Hispanic and Black Americans (see graph at left). The Great Recession was a boom for wealth accumulation for the richest Americans, while average Americans feel further behind in wealth accumulation through home equity. All Americans grew their wealth during the pandemic due to government transfers, but the wealthy, unsurprisingly, did much better.
The Great Recession (December 2007 to June 2009) was largely the result of an overextension of federally backed mortgage loans to average income families (many who could not keep up with payments), as well as an increase in predatory mortgage loans. As average families lost their homes to foreclosure, they also lost their ability to build wealth through home equity. Many Americans demanded a bailout for “main street” not Wall Street. As large banks were deemed too big to fail (learn more from the History Channel) received government support to keep running, millions of average Americans lost their jobs, home equity, and wealth.
While government programs did provide some loans to small business owners, tax credits to average families, and direct aid to those struggling with housing and food, average Americans’ ability to grow their wealth, long-term, was compromised. This exacerbated the wealth gap that continues to grow today. All Americans lost wealth during the Great Recession, but the richest gained wealth during the recovery period while all other Americans continued to lose wealth (see graph to right). The lowest income Americans lost the most capacity to build wealth during the recovery period after the recession.
By the time the pandemic began, the growing wealth gap impacted how different economic groups fared. Job losses hit lower wage earners harder. Many service and middle-income workers also lost income, even if they did not permanently lose their jobs, due to the temporary closure of businesses. Government programs during the pandemic were effective in preventing the devastating income losses seen during the recession and even helped modest income Americans gain some wealth. There were no widespread foreclosures during the pandemic and there was a federal moratorium on evictions, both of which protected wealth building through home equity for average Americans.
While all economic groups gained wealth during the pandemic, the top 1% gained much more. According to the New York Times, in 2021 “the richest 1% of Americans held 32% of the national wealth, its highest level since these records began in 1989.” At the same time, the bottom 50% held just 2% of the nation’s wealth (see graph). Today, it remains difficult for low to moderate income families, and young people, to build wealth through investments, savings, and home ownership.
Federal Income Tax
Current federal income tax brackets (rates based on income) are progressive, with higher earners paying a higher tax rate; however, it is less progressive at the top brackets (see Pew Research Center graph).
Some of the highest earners pay little or no income taxes because the amount they owe may be offset by investment losses. We strongly suggest reading this excellent expose published by Pro Publica to learn more about how the ultra-wealthy legally avoid paying income taxes (Eisinger et al., 2021). A White House (2021) analysis, that has been fact checked for accuracy, found that the tax rate for the wealthiest 400 families was effectively 8.2% based on the years 2010 to 2018, much lower than the average federal income tax rate of 14.9% (see graph above).
In redefining the tax bracket system, we propose implementing a progressive scale that provides a more gradual increase in tax rates for all tax brackets, especially higher income earners. Under this revised system, the top 1% will pay the nearly same tax rate (around 40%), while introducing additional higher tax brackets for individuals in the 0.005% and 0.002% income brackets. This adjustment will result in these higher earners contributing significantly more in taxes, helping to offset the burden on the top 1%-10% and ensuring a more progressive tax structure.
Furthermore, we recognize the need for simplicity and fairness in the tax system. To provide relief for lower-income individuals and promote ease of compliance, we suggest implementing a flat tax rate for the bottom 50% of earners. This flat tax rate of 5% will simplify the tax filing process for these individuals and ensure that they contribute their fair share while also factoring in the guaranteed Universal Basic Income (UBI) income of $1,500. This approach aims to strike a balance between progressive taxation and the need to support lower-income individuals.
Corporate Taxes
According to an investigation by the Institute on Taxation and Economic Policy (2021), in 2020 at least 55 of the largest corporations in the United States did not pay a single penny in taxes, while receiving $12 billion in tax breaks. They are able to do so either by either sheltering income in offshore accounts or using the systems to claim tax breaks and credits such as the tax break for executive stock options, the federal research and experimentation (R&E) tax credit, or tax breaks for renewable energy. Furthermore, companies can immediately write off capital investments as a result of the Tax Cuts and Jobs Act of 2017.
The federal corporate tax rate steadily declined during the 1970s and 1980s, then took a further dive in 2017 as result of the Tax Cuts and Jobs Act, from a flat rate of 35% to 21%. As federal corporate tax revenue has increased slightly over the past five years, individual federal income tax revenue has increased sharply. The sharp increase in federal income tax revenues appears to be due to more capital gains taxes being paid by wealthier Americans who did well during the pandemic. To ensure corporate tax revenue is steady, the People’s Union advocates for the corporate tax rate to be brought back up to 35%.
Furthermore, any attempts to evade taxes by relocating headquarters or offshore funds must be met with severe consequences, including the revocation of American market access until compliance is achieved. To combat international tax evasion, collaboration with the European Union and other allies is imperative. Together, we can establish a united front against profit shifting and offshore tax havens, ensuring that corporations pay their fair share in every country where they conduct business.
Tax Loopholes
There is a vast gap in wealth held by Americans of different economic classes and a large gap in wealth held between White and Black Americans. Those with the most assets tend to become wealthier over time because wealth produces more wealth through increases in the value of stocks, homes, and other items of value. Many of these assets are not taxed at a proportionate rate with income taxes.
Many wealthy individuals and families are able to legally (in some cases illegally) avoid paying certain taxes on assets, investments, and business income due to loopholes and advantages in the tax code. According to Americans for Tax Fairness (Tashman, 2024) “Of the $139 trillion in America’s national wealth, almost three-quarters (73 percent) is held by the richest 10 percent of households, over one-third (35 percent) by the richest 1 percent, and an astounding 11 percent — $15.2 trillion — is held by the handful of fortunate households that make up the billionaire and centi-millionaire class.”
Capital Gains
Capital gains taxes are paid on the sale of assets such as property, stock, bonds or cryptocurrency. Assets that are accumulated and not sold are not taxed. Americans for Tax Fairness calls these assets “unrealized capital gains.” The group reported that in 2022, 64,000 ultra-wealthy American families accumulated an astonishing $8.5 trillion in untaxed assets (Tashman, 2024). According to the report, “The wealthiest 1 percent of households hold 44 percent of national unrealized gains ($21.2 trillion), with billionaires and centi-millionaires alone controlling 18 percent ($8.5 trillion).
The People’s Union supports the implementation of a minimal tax on stocks, bonds, and derivatives trades. Specifically, we advocate for a .0025% tax on each dollar traded in the markets and .005% tax on the net profit of bonds. This means, for example, that a trade of $1,000 in stocks would be subject to a tax of $2.50. Many wealthy countries, including China, Brazil, and the U.K., already levy financial transaction taxes. It is estimated that this new speculation tax would raise $156.25 billion dollars in revenues from stock trades (Trading Economics, 2024) and $3.78 billion dollars in revenues from the net profit of U.S. bonds (World Economic Forum, 2023). A financial transaction tax has support from business leaders like Bill Gates and Warren Buffett, and a number of officials from the Reagan and Bush administrations, including Paul Volcker, Sheila Blair, and David Stockman. (Tax on Wall Street Speculation Act 2021).
Wealth Tax
The People’s Union also supports the Ultra Millionaire Tax, reintroduced by Senator Warren and several members of the House in 2024. Under this new tax, wealth in excess of $50 million dollars would be taxed and trusts would be taxed. Revenue lost due to the lack of taxation on trusts costs the federal government approximately $5 billion to $7 billion dollars annually, according to the office of Senator Elizabeth Warren (2024). Warren’s proposal would levy a 1% annual surtax (3% tax overall) on the net worth of households and trusts above $1 billion and a 2% annual tax on the net worth of households and trusts between $50 million and $1 billion. The tax would raise approximately $300 billion additional dollars in revenue annually.
IRS Changes
We are very encouraged with recent changes the IRS has made that will result in billions more revenue from taxing wealth passed among business partners. This change will halt what is known as partnership basis shifting whereby “a business or person can move assets among a series of related parties to avoid paying taxes” (Boak & Hussein, 2024). The IRS estimates this change will bring additional revenue of approximately $5 billion per year. The Biden administration also has infused the IRS with the resources it needs to update IT systems allowing for improved tracking of owed taxes and implementation of cost-efficient administrative processes. These changes are estimated to generate $56 billion in new revenue annually (Katz, 2024). The People’s Union would like to consult with CPAs to find additional means of closing other tax loopholes that allow the ultra-wealthy to shelter income and avoiding paying taxes.
Social Security and Expat Taxes
The Peoples’ Union proposes eliminating taxes on households where Social Security retirement benefits are the only income, while ensuring sufficient revenue through alternative means. Under the proposed system, millions of retirees will no longer face the burden of being taxed on their hard-earned dollars accumulated over a lifetime of work. It is unjust to subject retirement benefits to further taxation, especially considering the numerous taxes already paid throughout an individual’s working years. This change acknowledges the need to preserve retirement security and honor the contributions made by retirees to society. Several bills have been recently introduced in Congress to reform the taxing of social security income, including this one.
To ensure the continuity of essential public services and investment in our nation’s future, alternative revenue sources will be explored. Sales taxes, for instance, can serve as a fair and sufficient means of generating revenue. By shifting the focus of taxation away from retirement benefits and towards consumption, we strike a balance that respects the financial well-being of retirees while still providing the resources necessary for the functioning of our society.
We believe that Americans living abroad should not be taxed an amount in excess of the tax rate charged by the country they are living in. This proposed tax reform aims to incentivize economic growth and global competitiveness. By allowing US citizens to freely pursue opportunities abroad without the burden of excessive taxes, the reform fosters entrepreneurship, innovation, and international collaboration. Encouraging citizens to engage in international business ventures can lead to the expansion of US companies in global markets, boosting economic activity and creating domestic employment opportunities.
This proposed tax reform aims to incentivize economic growth and global competitiveness. By allowing US citizens to freely pursue opportunities abroad without the burden of excessive taxes, the reform fosters entrepreneurship, innovation, and international collaboration. Encouraging citizens to engage in international business ventures can lead to the expansion of US companies in global markets, boosting economic activity and creating domestic employment opportunities.
Eliminate Penalty for Renouncing Citizenship
We also believe citizens should have the right to renounce their citizenship without facing excessive barriers or punitive measures. At present, renouncing U.S. citizenship incurs a $2,350 State Department fee. This type of fee contradicts the principles enshrined in the Bill of Rights and goes against the spirit of personal liberty and autonomy. The fees associated with the renunciation process should be reasonable and cover only the administrative costs required to process the necessary paperwork. However, careful measures will be put in place to prevent citizens from exploiting the system by simply residing in another country for a specified number of months to avoid US taxes.
Tax on Religious Organizations
Religious organizations spend revenues and investments on a wide array of activities including private schools and colleges, human services, hospitals, charities, literature, salaries, media, etc. Much of the funding for these activities come from member donations. For example, The Church of Jesus Christ of Latter-day Saints (Mormon Church) collects ~$7 billion a year from church members, but the church also allegedly has investments worth over $100 billion dollars. The IRS has found that some of these assets had been hidden. A whistleblower reported that some of the church’s funds were earmarked for charitable activities but were never released, while some funding was illegally used to invest in for-profit business (Alfonsi, 2023).
Religious organizations in the U.S. are tax-exempt. To address concerns about wealth accumulation without sufficient reinvestment in the community, we propose that religious organizations are no longer recognized as non-profit public benefit organizations. This step ensures that churches are accountable for their financial activities and contribute to the betterment of society. We support implementing a flat corporate tax rate of 25% on all religious organizations operating in the country.
