Pro-Rich Tax Loopholes Are Turning the American Dream Into the American Nightmare

We’ve been told all our lives that America is a land of equal opportunity. We’ve been told that everyone has an equal chance of getting ahead—of landing a good job, making decent money, having a place to call their own.

This ideal has long been called the American Dream. It’s a pleasing phrase, but it runs head-on into an un-pleasing fact. The late comedian George Carlin said it all with a memorable wake-up call: “The reason they call it the American Dream is because you have to be asleep to believe it.”

Politicians have been proving Carlin right for decades, Republicans consistently and Democrats all too often. The GOP and the second Trump administration seem bent on doing what they’ve always done, sometimes even turning the American Dream into the American Nightmare.

Less revenue from the top means either higher taxes for those down below, making it harder for them to get along; or it means fewer dollars period, threatening the safety net programs that so many Americans depend on.

Taxes are a major contributor, especially the billions upon billions that the rich and corporations don’t pay. Trump and his fellow Republicans are committed to keeping it that way—and, if their slim congressional majorities can stick together, to do even more for those who need it the least. As one small example, the overall corporate tax rate could drop to 20%; domestic manufacturers could do even better, ending up with an effective corporate rate of 15%.

The federal tax code is famous (and infamous) for its huge handouts to those with the highest incomes, the most egregious being the cap on Social Security taxes.

Most workers pay the 6.2% Social Security tax on every dollar they make. Big earners, though, avoid that tax by the billions. There’s a dollar cap on earnings subject to the tax, and it rises yearly at the same rate as average wages. Last year’s cap was $168,600, for 2025 it’s $176,100.

For those in the earnings stratosphere, the cap means that Social Security taxes can literally begin and end on January 1. In 2024 Elon Musk hit the earnings cap at 12:04 am on New Year’s Day; for Tim Cook of Apple, it took all of two hours.

Lower taxes on income from wealth than income from work amount to another giant giveaway to the rich. Taxes on long-term capital gains top out at 20%; the corresponding rate on income from work is nearly twice as high at 37%.

The tax code is also chockful of loopholes, many of them so complex that ordinary Americans can’t even begin to understand them. The wealthy don’t understand them either, but they don’t have to. They’re able to pay small fortunes to have their tax accountants and lawyers handle it: “You have an army of well-trained, brilliant people who sit there all day long, charging $1,000 an hour, thinking up ways to beat” this tax, that tax, any tax.

One way or the other—whether it’s lawyers working loopholes, whether it’s the tax laws themselves—the rich somehow avoid paying tens of billions in taxes. All those lost billions lead inevitably to one result or the other, both of which gnaw away at The Dream. Less revenue from the top means either higher taxes for those down below, making it harder for them to get along; or it means fewer dollars period, threatening the safety net programs that so many Americans depend on.

Medicare is one of these programs, and its trust fund is set to run dry sometime in the 2030s. Wouldn’t you know it, part of the blame lies with some of the richest men in America. While paying Medicare taxes is routine for workers, a gilded few have been paying not a penny. ProPublica laid it all out in a piece published just last month, “How a Decades-Old Loophole Lets Billionaires Avoid Medicare Taxes.”

The Internal Revenue Service (IRS) acts as the nation’s steward for tax collection and enforcement. It’s long been GOP gospel to do whatever it can to lower collections and lessen enforcement.

Despite the fact that cutting IRS funding “doesn’t save money, it costs money,” Republicans have repeatedly slashed away. Between 2010 and 2021 alone, the GOP managed to reduce the IRS enforcement budget by nearly a quarter. The cutting is endless and relentless—and it’s not likely to change under Billy Long, Trump’s choice as an early replacement for the reformer Danny Werfel as IRS commissioner.

Summing up, you have to be in slumberland (or not paying attention) to believe in the American Dream. Taxes are a major downer, lopsidedly favoring those at the top. Those with the power to act need to finally wake up, to insist that corporations and the wealthy pay their fair share.

Fat chance, obscenely fat. With the GOP in control, America’s taxes will just keep on mocking the American Dream.

This piece was originally published by the New York Daily News on Wednesday, January 8, 2025.