Congress must raise taxes on the wealthy to pay for Build Back Better | Opinion
Photo by Evan Vucci/AP.
Over the last 18 months of pandemic and economic disruption, we’ve seen the hardships people face when they don’t have what they need to get by when illness or job loss strikes. And we’ve also seen how bold, smart policies can ensure everyday people and their families can put food on their tables and keep a roof over their heads.
From small towns and downtowns, more of us are also reckoning with our nation’s deep racial injustices and disparities, and seeking ways to right those wrongs.
Policymakers have a clear decision to make: build a stronger, more equitable future, or choose the status quo of increasing concentrations of income and wealth that waste the potential of so many of our neighbors while harming us all.
Federal decision-makers are currently considering legislation to “Build Back Better” by reducing child poverty, expanding access to health care, combating climate change, and promoting economic security for everyday Americans – especially those often left out because of who they are or where they live.
The tax and revenue components of recovery legislation should create greater economic security, fund the plan’s crucial investments, and make our tax laws more fair.
1. Use the power of the tax code to promote greater economic security and reduce poverty.
Federal recovery legislation should permanently expand the Child Tax Credit (CTC) so families can better afford the costs of raising healthy and thriving children, especially for the lower-income families who were previously left out. Temporary CTC improvements in the American Rescue Plan (ARP) passed earlier this year are expected to cut child poverty by 40 percent – that’s more than four million fewer children living in poverty in a typical year. That’s a historic outcome that is reducing hardship today and promotes better futures for kids all across the country.
Policymakers should also make permanent the ARP’s improvements to the Earned Income Tax Credit (EITC) for low-income workers not raising children in their homes – the only group of poor Americans made poorer through the federal tax code. Some 276,300 Minnesota workers would benefit from a permanently expanded EITC, including 23,100 Black workers, 17,900 Latino workers, and 11,700 Asian American workers.
As with the Child Tax Credit, EITC expansion can contribute to reducing our nation’s racial income gaps, a product of obstacles to economic opportunity that leaves people of color over-represented in low-paid work.
2. Raise revenues to fund crucial investments in a more equitable economy, robust communities, and confronting the climate crisis.
The CTC and EITC expansions that promote economic security for workers and their families, as well as the Build Back Better plan’s essential investments in child care, health care, housing, nutrition, addressing climate change, and more, should be funded by raising revenues from those with the most resources. Revenues should be raised from high-income and wealthy households, from profitable corporations, and better enforcement of the nation’s tax laws.
3. Make the tax code more fair by taxing income from wealth more like income from work, and end ineffective and inequitable elements of the corporate tax code.
Federal policymakers should start to dismantle current tax policies that give preferential treatment to income from investments and ownership that are highly concentrated among the wealthy.
Policymakers should take aim at the special exemptions and lower tax rates available to capital gains, dividends, and other ways that the wealthy can structure their incomes and grow their wealth differently from everyday folks who earn their incomes from wages and salaries.
Policymakers should also reverse ineffective corporate tax breaks. The 2017 federal tax bill substantially cut the corporate tax rate from 35% to 21%. Proponents of the “Tax Cuts and Jobs Act” said it would spur economic growth that would benefit shareholders and workers alike. But that stronger economic growth did not materialize, and the benefits primarily went to wealthy shareholders. They should also reduce current tax incentives to shift profits and operations to overseas “tax havens.”
Finally, recovery legislation should restore funding for IRS enforcement of tax laws already on the books. An estimated $600 billion in taxes go uncollected each year, of which $160 billion is attributed to the top 1% highest-income tax filers.
The choices before policymakers could not be clearer: pass recovery legislation that pursues a brighter, more equitable future, or return to the unacceptable status quo.
The pandemic has starkly demonstrated the harm to everyday folks when there aren’t robust systems in place so that everyone can stay healthy and make ends meet when the unexpected happens. More voices are echoing what many in our communities have long known: past policy choices and current obstacles to opportunity mean that our Black and brown neighbors especially bear the brunt of hard times.
Our tax policy can’t continue to prop up income inequality and concentration of wealth. Instead, tax laws should be made more equitable and fund investments to build a country where all can thrive.
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