Progressives in the United States cheered Wednesday in response to President Joe Biden's proposal to raise taxes on the country's wealthiest households and rein in tax evasion to fund universal preschool, affordable child care, and paid family and medical leave, among other social investments outlined in the White House's $1.8 trillion American Families Plan.
"The tax increases on wealthy individuals in President Biden's American Families Plan are exactly what this country needs," said Morris Pearl, former managing director at BlackRock and current chair of the Patriotic Millionaires, a group of rich Americans opposed to the unchecked concentration of wealth and power.
"High-income earners, wealthy investors, and millionaire heirs have skated by without paying their fair share for far too long," Pearl continued. "The tax hikes proposed by President Biden would reverse decades of our tax code prioritizing wealth over work."
The American Families Plan would raise the top marginal tax rate on the richest people in the U.S. from 37% to 39.6%, reversing part of former President Donald Trump's 2017 tax law.
The proposal would also close the so-called carried interest loophole—a tax break that benefits hedge fund and private equity executives—and increase the top tax rate on capital gains and dividends from 20% to 39.6% for households bringing in more than $1 million a year.
The next time you hear people complain about Biden's upcoming proposal to raise capital gains taxes on those earning $1 million+ remember this:— Patriotic Millionaires (@PatrioticMills) April 26, 2021
Those affected by Biden's proposed capital gains tax: 0.32%
Everyone else: 99.68%
"It is absurd that money earned from labor, from sweat and hard work, is currently taxed at nearly double the rate as money earned from passive investments," said Pearl. "My money should not be given special treatment over someone else's sweat. The Biden plan to raise the capital gains tax rate to match the ordinary income tax rate would correct this fundamental injustice in our tax code, and put everyone, worker and investor alike, on a level playing field."
The American Families Plan would close another tax loophole, known as the "stepped-up basis," which Pearl said "allows heirs of multi-million-dollar fortunes to avoid paying taxes on vast amounts of accumulated capital gains profits, contributing to the formation of the kind of permanently wealthy, hereditary elite that our Founding Fathers rebelled against. It has no place in our tax code, and the Biden plan to eliminate it should receive widespread support."
To ensure that rich Americans pay what they owe, Biden is calling for substantially increasing the budget of the Internal Revenue Service to provide the agency with resources to crack down on tax avoidance. According to a recent analysis by IRS researchers and academics, the richest 1% of U.S. households don't report around 21% of their income.
Tax the rich. It’s time that the ultra-wealthy finally pay their fair share.https://t.co/Hg6hWX1eVC— Pramila Jayapal (@PramilaJayapal) April 28, 2021
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The president's plan to "dramatically increase funding for the IRS to target wealthy tax evaders is incredibly important," said Pearl. "Thanks to years of deliberate underfunding of the IRS, wealthy tax cheats have been able to go unpunished, leading to the tax gap, or what is owed to the government in taxes but not paid, to reach over $1 trillion a year."
By closing the tax gap, we can generate trillions in revenue—without raising taxes a dime. That's why I have been pushing to properly fund the IRS and audit the rich.— Ro Khanna (@RoKhanna) April 28, 2021
Glad to see the Biden administration working to make this a reality. It is common sense.
Chuck Collins, director of the Program on Inequality at the Institute for Policy Studies, noted in a statement that decades of "wealth hoarding and tax avoidance by billionaires and multi-millionaires... is not an accident."
"The super-rich—those with over $30 million and up—hire a veritable army of what social scientists call the 'wealth defense industry' to dodge taxes, stash wealth, and lobby for weak taxes," said Collins. "These are highly paid tax attorneys, wealth managers, and accountants, who specialize in creating complex shell games using offshore tax havens, dynasty trusts, anonymous shell companies, and bogus transactions. Billionaires pay them millions to hide trillions."
Bolstering the IRS is "a vital first step to economic recovery and reducing extreme wealth inequality," Collins added. "The future of the IRS may determine whether we become a society dominated by billionaires or a functioning democracy."
One reason we should fully fund the IRS: Collecting all unpaid federal income taxes from the richest 1 percent would generate at least $1,750,000,000,000 over the decade.— Robert Reich (@RBReich) April 28, 2021
That would cover almost the entirety of Biden's American Families Plan. pic.twitter.com/6ZZYOoDWPs
Robert Weissman, president of Public Citizen, said that "not only will investments in increased enforcement have a strong multiplier effect, but it will also help restore the public's trust to know that everyone is paying what they owe. And it is far past time for the wealthy to pay a fairer share."
Pearl emphasized that "each of these tax increases would affect only the wealthiest Americans, a group that has seen their fortunes grow substantially over the last several decades and throughout the pandemic."
"Wealthy Americans like me can more than afford to pay higher taxes, and we should be expected to," Pearl continued. "With these plans, the Biden administration is ushering in a new, better vision for what our tax code should look like, one that shrinks inequality instead of contributing to it."
"The era of trickle-down nonsense is over—it's time to tax the rich," he added.