Sue Dinsdale is the director of Iowa Citizen Action Network and leads the Health Care For America NOW campaign in Iowa.
Rising inflation and the escalating cost of everything from gas to houses made Tax Day 2022 more memorable for some Americans than in past years. Rising economic anxiety is bound to collide with middle class tax bills as families worry about the future and make plans to tighten their belts over the short-term.
But the nation’s 700 billionaires face no such worries. Unlike the rest of us who struggled through the pandemic and are now trying to catch up in its aftermath, billionaires actually increased their wealth substantially during the last two years.
Yet, thanks to our skewed tax code, they won’t have to pay more in taxes like the rest of us do.
According to the Iowa State Billionaires Report, which draws on Forbes daa, U.S. billionaires have gotten $1.7 trillion richer over the first two years of the COVID-19 pandemic. Our state’s lone billionaire has gotten 43 percent richer, gaining $1.6 billion in wealth. That’s a stark contrast to the number of people who lost jobs, businesses and suffered through illness over that same period or even to the number of people who did fine during the pandemic but did not massively increase their personal wealth.
The private gain of Iowa’s billionaire contrasts sharply with the health and economic struggles that average Iowans are facing because of the pandemic. Over those same tough 10 months, some 326,000 state residents fell ill with the coronavirus, more than 5,100 died from it and thousands lost jobs in the accompanying recession.
As Iowa’s billionaire rides out the crisis on a rising tide of wealth, the state’s working families struggle to keep their heads above water. For example, U.S. Department of Labor data shows 46,694 state residents were collecting unemployment during the week that ended January 9. Thousands of Iowa small businesses, many of them restaurants and bars, closed their doors permanently during the first six months of the pandemic alone.
Late last year, 217,000 adult state residents, roughly 11 percent of that population, reported going hungry over the past week. The figure for households with children was 15 percent. See Table 1 in this report by the Center on Budget & Policy Priorities. Meanwhile, 18 percent of the state’s tenants—103,000—were behind in their rent at the end of 2020.
The concentration of wealth among the top 0.01 percent is astounding. The nation’s 700 billionaires now collectively control more wealth than the bottom half of the American population. That massive wealth doesn’t just enable them to buy rocket ships and professional sports teams. It also gives them virtually unfettered political power to keep the rules rigged in their favor.
When it comes to taxes, for example, the ultra wealthy don’t follow the rules the rest of us live by. Built-in loopholes and tax breaks enable many wealthy people to consistently pay lower tax rates than nurses, fire-fighters, and accountants.
While the rest of us pay taxes on the income we make from work, some of the wealthy pay nothing on gains they make from stocks and other financial assets–their chief source of income. When we get a raise on our jobs, we make more income and pay more taxes. But when rich people hit a stock market bonanza that increases their wealth exponentially, those gains are not taxed unless they sell the assets.
Economists have determined that when wealthy people’s stock gains are counted as income, the nation’s 400 richest billionaires paid a tax rate of only 8.2 percent over a recent nine-year period. Meanwhile, the average federal income-tax rate for all taxpayers was 13.3 percent in 2019.
Under the current rules, wealthy people don’t pay taxes on their assets until they sell those assets, but most don’t need to sell assets to live a lavish lifestyle. That means they can essentially hold on to their wealth indefinitely. To avoid paying taxes ever, rather than sell, they can pass their assets on to their heirs, thereby never paying what they would owe under the tax system that applies to the rest of us.
Americans love a good success story. Many of us enjoy the innovations and inventions that wealthy entrepreneurs have brought to the mainstream. But no matter how much money the wealthy make, they should still adhere to the same rules as everyone else. Twisted exceptionalism in the tax code enables the wealthy to profit from the American economy without actually contributing much back into it.
It doesn’t have to be this way. Wealthy people could continue to be wealthy while at the same time paying what they owe in taxes like the rest of us. But Congress needs to take action on good proposals that would finally require the richest people in America to pay a more fair share of taxes than they currently do.
President Joe Biden and U.S. Senator Ron Wyden of Oregon have proposed different versions of a Billionaires Income Tax that would finally require rich people with hundreds of millions or billions in wealth assets to pay taxes on the annual increases in their wealth generated by stock and other assets the same way that the rest of us pay taxes on our income from work. Polling shows that policy has broad public support: approximately 64 percent of voters, including 61 percent of independents.
The revenue raised from taxing this richest category of Americans could be used for any number of critical investments including lowering the cost of health care and education, covering dental, vision, and hearing services for seniors in Medicare for the first time, and increasing public safety.
If Congress took action to make the rich abide by some of the same tax rules that apply to everyone else, the rich would stay rich. But the rest of us—who helped make people like Jeff Bezos and Elon Musk rich in the first place—would benefit from that wealth too.
Top photo of Sue Dinsdale provided by the author and published with permission.