tax the rich

Activists demand higher taxes on the rich during a demonstration on May 17, 2021, in Tampa, Florida.

(Photo: Gerardo Mora/Getty Images for MoveOn)

How to Restore Trust in the US? Tax the Rich

The only major institution in American life that Americans trust less than Big Business just happens to be Congress, which has consistently refused to seriously tax the wealthy and the corporations they run.

We Americans don’t trust as much as we once did. So point out all the pollsters who’ve been tracking trust in the United States since the middle of the 20th century.

Back in the late 1950s, notes the Pew Research Center, “about three-quarters of Americans trusted the federal government to do the right thing almost always or most of the time.” The 1960s and 1970s, amid the Vietnam war and then Watergate, would see that level of trust trend steadily downward, only to recover a bit with Richard Nixon’s exit.

But that trust comeback would prove modest at best, never nearing the levels of the late 1950s. The last two decades have now seen those modest trust levels totally evaporate. And the distrust Americans feel, Gallup polling adds, extends to almost every major institution of modern American life.

Back in 1958—the high point of trust in American life—these rich faced a 91% tax on their annual income over $400,000, a sum equal to about $4.2 million today.

In 2022, Gallup reported this past July, only 15% of Americans professed a “great deal” of trust in the nation’s key institutions—and just 11% extended those institutions a “fair amount” of trust.

What’s driving America’s stunning descent into distrust over the past four decades? Taking a closer look at the institutions Americans distrust the most can provide some clues. Our second most-distrusted national institution turns out to be “Big Business.” Only 14% of the American people trust Corporate America a “great deal.”

Do Americans have cause to distrust Big Business? Sure do. No other institution in American life over recent decades has benefited so royally from America’s growing inequality, with CEO pay stats coming to best symbolize those royal benefits. CEO compensation levels, the Economic Policy Institute has detailed, have “skyrocketed” some 1,460% since 1978.

Back in that year, CEOs at major American corporations realized some 30 times more compensation than the nation’s private-sector workers. By 2022, that gap was running nearly 400 times.

Other stats, released earlier this month, vividly dramatize just how much cause Americans have to distrust Corporate America. U.S. companies, journalists at Popular Informationreport, currently owe over 200,000 American workers some $163.3 million in back pay. These millions represent wages that have gone unclaimed from companies found guilty of committing wage theft by, for instance, ignoring minimum wage or overtime pay regulations.

The federal Department of Labor has the authority to impose extra penalties on companies that repeatedly violate federal wage standards. But American corporations, the Peterson Institute for International Economics has shown, have precious little incentive not to commit wage theft. Over the decade that ended in 2016, Peterson analysts note, U.S. Department officials, identified nearly 3,000 of these repeat offenders. Only 10 of them ended up with federal criminal convictions.

Deep pockets in the United States enjoy all sorts of other special treatment, maybe none more lucrative than how the federal tax code treats “unrealized capital gains,” the wealth our richest accumulate when the value of their stocks and other assets start soaring.

Researchers at Americans for Tax Fairness revealed earlier this month that our richest personally worth at least $100 million spent 2022 holding “at least” $8.5 trillion of “unrealized capital gains.” These gains, the AFR analysts went on to show, help these rich lead luxuriously “extravagant” lives. Yet these same gains “receive an ongoing exemption from taxation in life and a permanent exemption in death.”

Lawmakers in Congress have done next to nothing to fix this capital gains tax outrage. And they haven’t taken any steps to make sure the federal Department of Labor has enough staff to effectively identify and prosecute companies that willfully and repeatedly commit wage theft.

These failures, in turn, can help explain why the only major institution in American life that Americans trust less than Big Business just happens to be Congress. Over recent decades, lawmakers in Congress have consistently refused to seriously tax the rich and the corporations they run.

Back in 1958—the high point of trust in American life—these rich faced a 91% tax on their annual income over $400,000, a sum equal to about $4.2 million today. The equivalent top rate today: 37%. Taking all loopholes into account, our richest 400 today pay federal taxes at just an overall 8.2% rate.

In healthy societies, people trust one another. How can we start building trust in today’s United States? What might make a good place to start rebuilding that trust? We could start by taxing—again—our most fabulously wealthy.

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