Why Wealthy Individuals Like Us Support Higher Taxes
Abigail Disney, a documentary filmmaker and activist, and Morris Pearl, chair of Patriotic Millionaires and former BlackRock executive, share their views on taxation. As Tax Day approaches, many Americans scramble to file their returns, but for the wealthiest, it's just another day. This day highlights the disparity in how taxes affect different income groups, with the ultra-rich often benefiting from loopholes and lower rates. Over recent years, billionaires have seen their wealth soar by over $1.5 trillion, a situation that is both unfair and unsustainable.
The growing inequality is threatening both the economy and democracy, prompting a need for reform. The ultra-wealthy should contribute more to the nation that enabled their success. Three key changes to the tax code could address this:
1. The current tax system favors passive income over earned income. Those who work for their money face higher tax rates compared to investors who earn through capital gains. Inherited wealth also enjoys significant tax advantages due to the 2017 tax law, allowing large sums to be passed down with minimal taxation. This creates an imbalance where those who inherit wealth pay far less than those who earn it.
2. The tax code should treat all income equally by taxing capital gains over $1 million at the same rate as regular income and replacing the estate tax with a straightforward inheritance tax.
3. Many of the richest Americans report little to no taxable income annually. They use their assets as collateral to borrow money at low interest rates, avoiding capital gains taxes. This "Buy, Borrow, Die" strategy leads to billionaires paying lower effective tax rates than working families. To address this, President Biden has suggested a Billionaire Minimum Income Tax on unrealized capital gains, and others have proposed wealth taxes.
Additionally, the tax system should differentiate between the merely rich and the ultra-rich. Currently, the top income tax rate is 37% for income over $578,125. This rate should be higher for those earning significantly more, with new brackets reaching up to 90% for incomes over $100 million.
These proposed changes won't solve all issues but would help curb the concentration of wealth among a small elite, strengthening both democracy and the economy. The tax code is a powerful tool for change, and it needs to be wielded more effectively.