During today’s hearing before the Senate Finance Committee, U.S. Senator Elizabeth Warren (D-Mass.) Asked Treasury Secretary Janet Yellen about the need for significant reforms to the U.S. tax code system . The exchange follows the recent ProPublica report which found that the wealthiest Americans often pay little or no federal income taxes. Senator Warren also continued her calls for a wealth tax for people with wealth over $ 50 million, which would generate at least $ 3 trillion in income over ten years – money that can be used to pay for universal child care, solve the affordable housing crisis, and rebuild crumbling infrastructure.
Transcription: “Hearing on the President’s budget for the financial year 2022”
United States Senate Finance Committee
Wednesday June 16, 2021
Senator Warren: Welcome President Yellen, look forward to seeing you or Secretary Yellen. It’s good to see you here. Last week, ProPublica released a survey of some of the wealthiest Americans’ tax returns showing that year after year multibillionaires pay virtually no federal income tax.
And here’s the worst part: it is possible that they did everything legally.
This is because, year after year, lobbyists and members of Congress have worked together to hollow out the tax code.
So take Jeff Bezos. He is the second richest person in the world. His net worth is almost $ 195 billion. But his salary? It’s about the same as the average Massachusetts public school teacher: $ 80,000.
So, Secretary Yellen, I want to ask who our tax code is structured to benefit: Jeff Bezos, or a teacher at a Massachusetts public school.
The average family in America pays about 7.2% of its total wealth in taxes, and that includes public school teachers. If the same rate applied to Jeff Bezos last year, he would have paid $ 14 billion in taxes.
So Secretary Yellen, if all we do is raise the federal income tax rate, is it ever possible for Mr. Bezos to pay the same proportion of his fortune in taxes as the average school teacher? public?
Secretary Yellen: Well, President Biden is proposing some important ways to address this disparity.
Senator Warren: I understand that. But let’s start with our current tax code. If we continue to focus on income tax, will Jeff Bezos ever pay a proportional amount of his wealth, as a teacher in Massachusetts will say?
Secretary Yellen: Well if we raise the capital gains rate and we take out the base increase and treat death as a realization event, then all of those capital gains are taxed and not allowed to be taxed. permanently, so if we tax capital gains –
Senator Warren: I’m sorry, Secretary Yellen, I don’t mean to interrupt you, but my question was quite simple. It was income taxes, and I think what you’re saying is that the only way we can get a Jeff Bezos tax rate is to tax something other than income. His income is only $ 80,000 a year. And Jeff Bezos uses whatever tricks he can to keep his money in the form of what is now tax-free wealth.
So let me ask you a different question, if billionaires like Jeff Bezos have a salary roughly like the average teacher in a public school, how do they get the money to buy mansions, private islands and superyachts? ?
Well the answer is they can borrow from their wealth rather than making the gains from growth in stocks.
So, Secretary Yellen, do multibillionaires pay taxes when they borrow against their wealth to do things like buy superyachts?
Secretary Yellen: Well, to the extent that they avoid capital gains by selling assets to meet those spending needs, they avoid paying capital gains tax and even if they did, the capital gains tax in capital is less than what your Massachusetts teacher can earn. And so that seems like unfair tax avoidance and of course anyone can borrow against assets, but billionaires have a lot to do with borrowing.
Senator Warren: Well actually let me ask you a question on this because I think you get to the heart of the matter. Does the Massachusetts Public School teacher have the same options as Jeff Bezos i.e. the ability to collect shares instead of a salary, the ability not to pay any taxes, the ability to accumulate wealth tax-free and have plenty of cash to pay your bills by borrowing?
Secretary Yellen: No, your school teacher does not have most of these options. And the Biden proposal would end many of those options for the very wealthy.
Senator Warren: So,
Secretary Yellen: In all kinds of different ways we – the deferred interest loophole would be closed, there would be higher capital gains taxes, and no base markup on death, and it would all be for the lifetime of one person.
Senator Warren: Thus, under our current law, the teacher will pay her taxes, year after year, to help support her community and help support the nation. And Jeff Bezos laughs at her for paying all the freight while he keeps his money, and even builds his personal wealth, without paying a dime more in taxes.
Our tax code basically allows billionaires like Bezos to opt out. He says: once you have accumulated enough wealth, you don’t have to pay anymore to run this country.
Jeff Bezos is a billionaire con artist, just like the rest of those extremely wealthy people who pay next to nothing in taxes.
So Secretary Yellen, we have a choice. Do you think we should stop trying to tax the ultra-rich like Jeff Bezos, or should we change our tax laws so billionaires also have to help pay to run this country?
Secretary Yellen: We have proposed changes to tax laws to make them much fairer on all these dimensions and this is at the heart of the tax proposals that President Biden presented in this budget.
Senator Warren: Correct, and I support the President’s proposals. They will go a long way in generating income for everyone by making taxes on millionaires a little fairer.
But I want to stress that the simplest and most obvious solution to this tilted system is to institute a wealth tax. A personal tax worth more than $ 50 million would bring in at least 3 trillion income dollars. And that’s money for universal child care, to tackle the housing crisis, to rebuild our crumbling infrastructure.
It’s about choice. We can fund universal child care. Or we can give Jeff Bezos enough tax savings to build a superyacht.
Senator Crapo: thank you, Senator Warren.
Senator Warren: It’s time to make the tax code work for public school teachers. Not Jeff Bezos.
Thank you, Mr. Chairman.