by Jai Chavis
In October 2020, wealth data showed that the 50 richest Americans owned as much wealth as the bottom 50% of the US population, a stark reminder of how extreme income inequality and profit accumulation has become in the past few years. Inequality has accelerated through the huge profits gained by the richest billionaires in the country during the COVID-19 pandemic.
It’s common knowledge that the super-rich and corporations use loopholes and maneuvering to avoid paying their taxes, as evidenced by the Panama papers and various other revelations about tax havens used to hide and hoard wealth. Amazon made numerous headlines for somehow managing to pay no federal income taxes in 2017 and 2018 despite being one of the largest and most successful corporations in the world. Yet the extent and the manner through which individual billionaires accomplish similar forms of tax avoidance —which is nothing more than legalized theft of what should be public funds that can be used to improve services, infrastructure, and raise wages—has not been well understood. On June 8th, a new report from ProPublica was released detailing the leaked federal income tax files of the 25 richest Americans (including the likes of Jeff Bezos, Warren Buffet, and Elon Musk).
“From 2014 to 2018, the 25 wealthiest Americans paid an average of 15.8 percent, or $13.6 billion, in personal federal income taxes.” Or in other words, the effective tax rate of these handful of capitalists is (at best) roughly equivalent to or (at worst) less than the federal income tax rates of the vast majority of workers! And all of this was perfectly legal within the extremely regressive tax system in the U.S. that’s intentionally designed to allow for exactly this sort of legalized tax evasion. This legal theft can include intentionally taking out massive loans, since loans are not taxable, and buying up expensive assets and investments, like yachts and shares in their own companies, that can all be deducted from their income when filing their taxes.
The absurdity of these evasive tactics knows no bounds. These executives are able to get away with paying next to no federal income taxes in some years (and literally zero in other years). In one example, Jeff Bezos even received a $4,000 tax credit rather than paying any federal income taxes that year, despite already being a billionaire at the time! Yet the primary concern of the Biden administration is not a fundamental restructuring of the tax code, it’s investigating and punishing the source of the leaked tax documents, maybe considering some minor tweaks to the tax code, and giving the IRS a small increase in funding over the course of a decade. No serious discussion of overhauling the tax code is on the table for either major political party. Indeed, the Biden administration displays open opposition towards any sort of wealth tax—as opposed to the current focus on taxing “income” which is a much narrower definition that opens loopholes for the vast majority of capitalists’ resources.
So-called “progressives” within the Democratic Party like Elizabeth Warren have put forward really inadequate proposals such as a “2 percent [wealth] tax on an individual’s net worth above $50 million.” While of course 2% is better than nothing, it’s absolutely meager compared to the mountains of needlessly accumulated wealth hoarded by the capitalist class. Working people are constantly told there is no money for universal healthcare (even during a global pandemic), a green infrastructure and jobs program (during devastating climate change), public transit, and public schools. The fact that Elizabeth Warren, one of the most “progressive” Democrats in the Senate, can seriously put forward a 2% wealth tax as if it is a fundamental change demonstrates the complete inability of the Democrats to put forward any alternative to the chaos and chronic underfunding of public services that capitalism constantly subjects us to. If we are to seriously invest in services that we workers need, it will take far more than what Elizabeth Warren, Bernie Sanders, the “Squad”, or any other Democrats can put forward.
Recently, the G7—an informal financial forum consisting of representatives from the largest national economies in the world—decided to go a bit further and support a 15% minimum corporate tax rate globally. It is extremely unlikely this sort of proposal will be implemented by the various capitalist governments in the G7. Given the recent decades of neoliberal policies that gut tax codes and deregulated markets, a 15% tax on all corporate profits sounds quite radical at face value. In reality, it pales in comparison to the history of corporate taxes. In the US, the federal corporate income tax rate peaked at 52.8% from 1968 to 1969. The personal income tax rate for incomes greater than $200,000 was 94% from 1944 to 1945. The highest individual tax rate is currently 37%, and the ProPublica report has revealed how easily these taxes can be avoided by the capitalist class. A return to historic tax rates, closing the numerous tax loopholes, lowering tax rates for workers and the middle class, and taxing the wealth of corporations and the super-rich (not just narrowly-defined “income”) is a far better immediate demand than what either Warren or the G7 are willing to offer workers.
Similarly, all the Biden administration offers is doubling the taxes on selling investments for the rich and slowly dripping $80 billion of additional funds into the IRS over a 10-year period in the hopes that they can chase down individual capitalists trying to “cheat” the system. If the tax system is already so broken that billionaires can legally pay next to no income taxes by using the right loopholes, dumping additional funds into the IRS is clearly nothing more than a smokescreen to give the appearance of addressing the issue while actually accomplishing nothing for working people. Meanwhile workers are needlessly overtaxed despite having little to no wealth.
The wealth of a mere 25 individuals increased by $400 billion in just a 5-year span. This doesn’t even begin to mention the wealth of the corporations they control, or of the corporate executives and investors. These recent tax revelations are yet another reminder that funding the essential things workers need like raising the minimum wage to $20/hour, free and affordable housing, free universal healthcare, fully funded education, public works programs to rebuild infrastructure, and far more are all immediately achievable. The wealth needed to do so is merely hoarded by a system designed to concentrate wealth for the benefits of a small few with wanton disregard for the needs of the vast majority.
If we want to defeat the massive lobbying machine that maintains the existence of our regressive and decidedly anti-worker tax code and use this hoarded wealth for actual public good (and not on weapons, military technology, and militarized cops and borders), it will require building and rebuilding combative working-class organizations, culminating in the formation of workers party that is independent of the Democrats and Republicans and the corporations that back them. We must fight on a clear socialist program opposing neoliberal privatization, tax cuts for the rich, and bloated military spending.
A more progressive tax system can and should play an important role in our struggle against the worst abuses of capitalism and also help redistribute wealth into working class communities. But taxation alone cannot solve the fundamental problems with capitalism, namely that an undemocratic, small minority controls the vast majority of the wealth and the economy, which is used to exert massive amounts of influence over the capitalist government to prevent regulation or any fundamental changes to how our society functions. If we are to have a truly democratically run and equitable society, we must do away with the vicious and exploitative capitalist system, nationalize the wealth of the super-rich and their corporations, and run the economy through democratic planning of and by the working class. Workers produce the mountains of wealth capitalists steal from our labor. The only way out of the crises of capitalism is to recognize this fact, fight to end this economic system that creates the obscenity of billionaires, and use the wealth we create as workers in the U.S. and around the world to organize international socialism.