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There has been a back-and-forth throughout American history: How much tax should the rich pay?
In colonial times, parts of the north taxed the rich more heavily than Europe, and Massachusetts even went so far as to enact a wealth tax that covered financial possessions, land, jewelry, and more. In contrast, the southern colonies kept tax rates low and ineffective to prevent taxes from undermining slavery by undermining the wealth of the slave owners.
After the country was founded, low-tax advocates generally prevailed until the 20th century when growing inequality, two wars, and the Great Depression prompted Washington to create the most advanced tax system in the world. Then the situation turned around again and the top tax rates collapsed in the last few decades.
Yesterday, the news organization ProPublica published an overview based on the tax returns of thousands of wealthy Americans, including Jeff Bezos, Warren Buffett, Bill Gates, Rupert Murdoch, Elon Musk and Mark Zuckerberg. An anonymous source sent the material to ProPublica after the organization published articles about the lax enforcement of IRS taxes on the rich. (Here is ProPublica’s explanation of why, despite privacy concerns, it decided to post the new story.)
The tax returns provide details on a story that has long been clear: The rich are now paying remarkably low tax rates.
To take an example, Bezos’ net worth rose $ 120 billion from 2006 to 2018, and his federal taxes were only 1.09 percent of the increase in wealth during that time. The situation for the average household was radically different: its taxes accounted for more than 100 percent of its wealth growth.
A key reason very wealthy people can avoid taxes is that the US system only taxes so-called realized gains – like wages or stock sales. But the rich often live on unrealized gains – in the form of stocks and other assets that increase in value over time. The rich borrow against these assets to pay for houses, islands, and private planes, and then employ a variety of strategies to avoid taxes on debt payments.
One such strategy is to wait until after death to repay the loan – or what Edward McCaffery, a tax expert at the University of Southern California calls “buy, borrow, die”. Robert McClelland from the Center for Tax Policy called it the most important revelation in ProPublica history.
The wealthy can often keep their taxable income low. In 2011, Bezos reported such low income that he qualified – and claimed – a $ 4,000 child tax credit. In both 2016 and 2017, Carl Icahn, a billionaire, did not pay federal income taxes.
Legal tax avoidance by the rich has spread over the past half century for a number of reasons. For one thing, inequality has increased, which means the rich have more wealth to protect. And tax rates have dropped significantly.
“It’s amazing how much we’ve cut taxes since 1997 – on dividends, the inheritance tax ceiling, capital gains, and the top rate,” said Owen Zidar, an economist at Princeton University. “All of these things have gotten more favorable to the top of the distribution.” Lowering the corporate tax rate – effectively a tax break for shareholders – was also important.
Sometimes one hears the cynical view that there is no point raising taxes on the rich because they have the means to evade any taxes the government is trying to raise. But history suggests otherwise.
While some tax avoidance is inevitable, the federal government has largely managed to raise taxes when it tried. The richest Americans paid more than 50 percent of their income in federal taxes in the 1950s and 60s (and were less successful at protecting their wealth from taxes). Today this share has fallen below 30 percent.
According to Gabriel Zucman of the University of California at Berkeley, there are three ways to reverse the decline in tax payments by the rich. One of them is a direct wealth tax, as proposed by Senators Bernie Sanders and Elizabeth Warren. Second, it’s a tax on unrealized gains – assets that have become more valuable – as Oregon Senator Ron Wyden suggested. Three is a corporate tax hike, as President Biden prefers. There are also more modest ideas like a bigger inheritance tax.
Corporations can choose how much to tax their richest people or not, Zucman said. “For billionaires,” he added, “federal income tax – the pillar of the US tax system – has become a voluntary tax.”
Michael Linden, Official of the Biden Administration: “We already knew that some of the largest companies don’t pay income tax. Now we know that some of the richest people can get away with income tax. Time for reforms. “
Binyamin Appelbaum, New York Times opinion: “The rich live by different rules and spend lavishly money that is not taxed as income.”
Jody Avirgan, Podcast host: “There is already a dulled attitude towards the ProPublica IRS reporting that ‘what kind of scandal is this, this is all the stuff every rich person or financial journalist already knew about.’ But that’s exactly what it’s all about! “
Megan McArdle, The Washington Post: “I thought ProPublica’s analysis of billionaire taxes was going to be exciting. Instead, it told me things I already knew. … The most exciting thing is to wonder who gave them the information and how long that person will be in jail if they get caught, as I suspect. ”(Federal agencies are investigating the leak.)
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She is an 18-year-old pop star with two hit singles and the biggest debut album of the year. She has received praise from Taylor Swift and has performed at awards shows. But less than a year ago, you probably didn’t know Olivia Rodrigo’s name.
Although Rodrigo grew up in the entertainment business – she starred in a “High School Musical” spin-off on Disney + – she gained mainstream fame with the release of her blockbuster single “Drivers License” in January. Her album “Sour” built on this dynamic. It’s a burning breakup album, co-written by Rodrigo, that is full of anger and intergenerational fear. There are pop-punk songs that are reminiscent of Avril Lavigne and Paramore, and detailed lyrics that are inspired by Swift.
“It’s moody, poppy, punky, good, funny, sweet, sad and speaks to the overwhelming feelings of being alive and being in unrequited love,” writes Scaachi Koul in BuzzFeed News.
Rodrigo’s popularity isn’t limited to Generation Z’s. Older listeners (and critics) have embraced their music. Lindsay Zoladz, who writes for NPR, said her teenage self was skeptical of Rodrigo’s Disney pedigree. “But in the end I have to believe that I would have been drawn to the oceanic pull of the subjectivity of her music, an exquisitely detailed, heartfelt perspective of a young girl.” – Sanam Yar
For more: Music critics delve deeply into Rodrigo’s success in the latest episode of “Popcast”.