Issue: Above are the Federal tax brackets in 1977 (adjusted for inflation) and 2017. Notice any differences? There are three key distinctions that hold the key to creating a more progressive tax code today. First, the top income brackets were taxed over 30% more 40 years ago than they are today. Second, the two tax codes considered very different income groups responsible for paying higher taxes on their income over a certain threshold. Third, 40 years ago we had far more overall tax brackets than we do today.
Further, one of the most overlooked aspects of our tax code is the fact that the federal government gives away over a trillion dollars a year of potential revenue in tax breaks. In 2015, individual tax breaks, most of which go to the richest Americans, cost Congress $1.168 trillion in potential revenue. That’s more money than we spent on every federal healthcare program combined, and enough to pay off our entire national debt in less than two decades if appropriated annually. The GOP’s 2018 budget will blow another $1.5 trillion hole in annual revenue, a transfer of wealth directly to the 1%.
Proposal: It’s time for the individuals who have hoarded the wealth generated in this country for the past 40
years to pay it forward. If Congress is serious about combating income inequality, they must pass progressive tax reform that does several things. First, we must create at least five new tax brackets above the existing ones – separating those who make $418,400 a year from those who make over $750,000 a year, $1 million a year, $5 million, $10 million, and $50 million (with slight variations for couples and heads of household). Additionally, we need to lower the taxable income percentage to 5% (instead of 10%) for the lowest bracket and move upwards, providing tax relief to millions. Annual income over $750,000 per individual will then be taxed at 39.6%, income over $1 million will be taxed at 45%, income over $5 million will be taxed at 50%, income over $10 million will be taxed at 55%, and income over $50 million will be taxed at 60%.
Moreover, we must end tax relief and exemptions for capital gains on long-term investments and qualified dividends. These must be taxed at the standard federal income tax rate. We must also reaffirm our commitment to the estate tax. With this restructuring of our tax code, not only will we be able to ease the burden of taxes on millions of Americans, but we will begin to generate revenue we have missed out on for decades, so that we can increase funding in our federal budget to agencies and programs that most need it as well as pay off the debt that we owe.
Of course, to make a more progressive tax code effective, it must be backed up with a serious enforcement mechanism. That’s why as part of tax reform, Congress must implement air-tight anti-money laundering laws that allocate additional funding to IRS investigators and give the agency the authority to freeze the assets of any individual hiding over $1 million in offshore tax havens until they fully comply with all audit requests.