Turn Populism Into Equitable Prosperity

President Biden’s infrastructure proposal is very popular with the American people. Surveys show that when it is coupled with the plan to finance it by increasing taxes on the wealthy it is even more popular. How often do you find support for tax increases? Donald Trump won in 2016 in part by riding a populism wave. Trump turned out to be anything but a populist but he fooled enough people for at least a few months. Here is the important point: couple those two facts together and I have most of the answer to the question: How are we going to pay for new programs?

Inequity is a huge problem in today’s America. (If you want a nerdy study of inequity across the last several centuries read Thomas Piketty’s Capital and Ideology. It will surprise you how many times inequity resulted in political upheaval.) Using very rough numbers, currently in America the top 1% holds about 50% of the wealth. Even within that top 1% it is far from evenly distributed with most of it concentrated in the top 1% of that 1%. While compared to the rest of the world we enjoy a relatively high standard of living most of us in the working and middle classes live pretty much paycheck to paycheck. We get taxed on everything we make, often taken out of those aforementioned paychecks in the form of withholdings before we see them.

The root problem is the influence of money in politics. The 99% don’t have an army of deep pocketed lobbyists; the 1% do. If the wealthy are not in office, they effectively own those who are and those legislators make the laws. The best way to keep those campaign donations rolling in is to grease the palms that write the checks. In the case of business it is even worse. The mom and pop business can’t afford lobbyists or large donations. At best they can write a few relatively small checks and join a trade group which they have an extremely small voice in. The loopholes are not written to benefit the corner store; they are written to benefit the corporate giants. We have major international corporations headquartered and/or doing hundreds of millions of dollars or more in business in the United States that pay zero in federal income taxes.

I am suggesting that we institute a minimum federal income tax for all business doing over a certain amount of gross business in the United States regardless of any other tax provisions. That is only equitable. If Joe Lunchbucket, making under $15 an hour has to pay federal income taxes why shouldn’t a multibillion dollar business?

Treasury Secretary Janet Yellen recently proposed a global minimum corporate tax. The reality is that several nations will never go along with that. That is not a killer as far as the United Sates is concerned. We are a major market – in most cases the most desirable market – for most goods and services. We can simply pass a law that says if you do business in America, you are subject to the minimum global income tax. Many large American corporations may be willing to incorporate in some distant land but not if it costs them the American market. In a similar vein we have to plug the accounting trick of transferring profits to other countries in the avoidance of American taxes.

If you want a prudent investment of American tax dollars I suggest we spend a lot more on IRS enforcement. It is easy to audit lower income individuals or mom and pop operations. Catching tax cheats at the top is more complex however it is more financially rewarding. The current rule of thumb is that for every dollar spent on the IRS they return six dollars in revenue for the federal government. If more resources were able to be allocated to the upper crust the return would be even greater. Simply put, that’s where the money is.

In the special case of Social Security, I feel all income should be subject to the Social Security tax. Why is it cut off at any point? To the degree that people feel the program is not secure this would allay the misgivings. Furthermore, I feel (perhaps with a needs test) Social Security payments should be raised and this would fund the raise. Remember raising the income of people at or near the bottom quickly translates into spending. With credit to Nobel Prize winning economist Paul Krugman: Your spending is my income and vice versa. Money distributed to the lower income people will be spent at Circle K not hiding in the Cayman Islands.

Personal income tax loopholes that only benefit a fortunate well heeled few must also be plugged. Republicans don’t want to let a middle class New Jersey couple deduct their local property taxes but they think it is perfectly fine for a few big boys to pay a lower rate on their income via carried interest or capital gains provisions. That middle class couple commits the “sin” of actually working for their money; heck, they may even sweat and/or get dirty in the process.

I could go on with many other examples but you get the idea. Most Americans would agree with my examples. While there are plenty of Democratic office holders with “fiscal blood on their hands” the prime culprits are Republicans. In their frustration and/or ignorance people voted for Republicans including Trump and will most likely continue on their misguided, self-defeating way in doing so. What the Democrats have to do is harness this populism and turn it into equitable prosperity by fairly taxing every person and entity.

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