Electronic tax

Tax breaks help the rich get richer | News, Sports, Jobs

An extraordinarily cruel pandemic has been extraordinarily good for the rich, especially the super-rich. New billionaires were invented at the rate of one every 30 hours. For those already in the category, dollars have been rising faster than ever. In the first two years of Covid, the value of the world’s more than 2,000 billionaires rose by $3.78 trillion.

To cite just a few examples, Elon Musk went from $24.6 billion in March 2020 to $234 billion about two years later. Google co-founders Larry Page and Sergey Brin just doubled their wealth, to nearly $114 billion and $109 billion, respectively.

While the ultra-rich enjoyed huge gains, the taxes they paid were anything but. Those at the top have average federal income taxes of just 8.2%, “a lower rate than many ordinary Americans pay.” Congress has been a major ally, offering a range of tax giveaways that overwhelmingly favor the cash-rich, from the mega-rich to the rich of the garden variety.

One of the biggest breaks, fraught with irony, is the fact that taxes are higher on labor income than on wealth income (e.g. capital gains and dividend income). The maximum rate on long-term capital gains is only 20%, compared to 37% on earned income such as wages.

Some of the irony comes straight from history. More than a generation ago, in the Tax Reform Act of 1986, Republican icon Ronald Reagan equalized taxes on capital gains and other income. It was Democrat Bill Clinton who went back to the old way, reducing capital gains rates.

There’s a lot of talk (most recently from President Biden) about restoring tax equality, but that’s not going to happen anytime soon. What is about to happen instead is yet another gift to wealthy retirees.

More than two years ago, on April 13, 2020, readers of the Daily News came across this headline: “The coronavirus stimulus has been a boon for affluent retirees.” The story was about the required retirement account distributions being waived for a year, including of course the accompanying taxes. The 2020 move was a blow, a temporary boon; what is now on deck, requiring only Senate approval, is a permanent three-year pushback. Instead of starting at age 72, mandatory taxable distributions would only start at age 75.

It’s the key provision of the Securing a Strong Retirement Act of 2022. All House Democrats voted in favour, with the only noes coming from five Republicans. Daniel Hemel, a tax professor at NYU School of Law, called it “a deeply cynical deficit-increasing giveaway for high-income taxpayers…Progressives and deficit hawks should say no to this gimmick.”

Tax lawyer Robert Lord spoke of the corruption of the 1974 law that first established retirement accounts: “What began as a well-designed program to help ordinary Americans…has been transformed by the financial sector, the wealthy they serve, and those who bring them water in Congress. Today, IRAs and retirement plans… operate primarily as vehicles to further enrich America’s wealthiest.

Figures compiled by the Tax Policy Center confirm Lord’s assertion: “[A]Nearly 90% of tax breaks for retirement savings go to the wealthiest 20% of U.S. households, a group that would save anyway.

Tax expert Len Burman also weighed in on the new Secure Act, calling it “regressive and a budget rip-off. It’s considered revenue-neutral, but it will cost billions of dollars in lost revenue outside of the “budget window.”

In the end, this is just another affront to tax fairness. Only the details set it apart from all the other slaps that already litter the tax code. (There’s already one more in the works, a bipartisan cryptocurrency bill from the Senate that includes “a huge tax avoidance opportunity for those involved in the crypto industry.”)

Nothing is more subjective than taxes, and conservative editor Steve Forbes once offered his own version: “The tax code is a monstrosity and there’s only one thing to do with it. Destroy him, kill him, drive a stake through his heart, bury him and hope he never rises again to terrorize the American people.

Few would have suspected that the tax code itself — over time and with constant help from Congress — would become one of the most generous friends the wealthy have ever had.

Gerald E. Scorse is a former Post-Journal staffer. This article first appeared on www.nydailynews.com

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