An extraordinarily cruel pandemic has been extraordinarily good for the rich, especially the super-rich. New billionaires were struck at the rate of one every 30 hours. For those already in the category, dollars have been flying faster than ever. In the first two years of COVID, the value of the world’s 2,000 billionaires increased by approximately $3.78 trillion.
To name just one couple of examples, Elon Musk went from $24.6 billion in March 2020 to $234 billion about two years later. Meanwhile, Google co-founders Larry Page and Sergey Brin only doubled their wealth – to nearly $114 billion and $109 billion, respectively.
While the ultra-rich have enjoyed huge gains, the taxes they pay have been anything but. those at all High have an average federal income tax of just 8.2%, “a lower rate than many ordinary Americans pay.” Congress has been a major ally, offering a range of tax giveaways that overwhelmingly favor people with silver – from the mega-rich to the rich in garden varieties.
One of the biggest breaks, fraught with irony, is the fact that taxes are higher on labor income than on wealth income (e.g. capital gains and dividend income). The maximum rate on long-term capital gains is only 20%, compared to 37% on earned income such as wages.
Some of the irony comes straight from history. More than a generation ago, in the Tax Reform Act of 1986, Republican icon Ronald Reagan equalized capital gains taxes and other income. It was Democrat Bill Clinton who went back to the old, Chopped off capital gains rate.
There is a lot of talk (most recently from President Biden) on restoring tax equality, but that did not come close to happening. What is about to happen instead is yet another gift to wealthy retirees.
More than two years ago, on April 13, 2020, readers of the Daily News came across this headline: “Coronavirus stimulus has been a boon for affluent pensioners. The story was about the required retirement account distributions being waived for a year, including of course the accompanying taxes. The 2020 move was a blow, a temporary boon; what is now on deck, requiring only Senate approval, is a permanent three-year pushback. Instead of starting at age 72, mandatory taxable distributions would only start at age 75.
This is the key provision of the Securing a Strong Retirement Act of 2022. All House Democrats voted yes, with the only noes coming from five Republicans. Daniel Hemel, professor of taxation at NYU School of Law, called him “a deeply cynical deficit-increasing giveaway for high-income taxpayers…Progressives and deficit hawks should say no to this gimmick.”
The daily news flash
Days of the week
Find the five best stories of the day every afternoon of the week.
Tax lawyer Robert Lord spoke with the Corruption of the 1974 law that established the first retirement accounts: “What began as a well-designed program to help ordinary Americans…has been transformed by the financial sector, the wealthy they serve and those who bring them water in Congress. Today, IRAs and retirement plans… operate primarily as vehicles to further enrich America’s wealthiest.
Tax expert Len Burman also weighed in on the new Secure Act, call it is “regressive and a budget rip-off. It’s considered revenue-neutral, but it will cost billions of dollars in lost revenue outside of the “budget window.” ”
In the end, this is just another affront to tax fairness. Only the details set it apart from all the other slaps that already litter the tax code. (There’s already another one in the works, a bipartisan senatorial cryptocurrency invoice which includes “a huge tax avoidance opportunity for those involved in the crypto industry”.)
Nothing is more subjective than taxes, and conservative editor Steve Forbes once offered his own take“The tax code is a monstrosity and there’s only one thing to do with it. Tear him down, kill him, drive a stake through his heart, bury him, and hope he never rises again to terrorize the American people.
Few would have suspected that the tax code itself — over time and with constant help from Congress — would become one of the most generous friends the wealthy have ever had.
Scorse writes about taxes.