An extraordinarily cruel pandemic has been extraordinarily good to the rich, especially the super-rich. New billionaires have been coined at the rate of one every 30 hours. For those already in the category, the dollars have risen faster than ever. In the first two years of Covid, the worth of the world’s over 2,000 billionaires went up by $3.78 trillion.
To name just a couple of examples, Elon Musk went from $24.6 billion in March 2020 to $234 billion roughly two years later. The co-founders of Google, Larry Page and Sergey Brin, merely doubled their wealth–to nearly $114 billion and $109 billion, respectively.
While the ultra-rich were enjoying huge gains, the taxes they pay have been anything but. Those at the very top have been averaging federal income taxes of just 8.2 percent, “a lower rate than many ordinary Americans pay.” Congress has been a major helpmate, offering an array of tax giveaways that overwhelmingly favor people with money–from the mega-rich all the way down to the garden variety rich.
One of the biggest breaks, heavy with irony, is the fact that taxes are higher on work income than they are on wealth income (e.g., income from capital gains and dividends). 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. Over a generation ago, in the Tax Reform Act of 1986, the Republican icon Ronald Reagan equalized taxes on capital gains and other income. It was Democrat Bill Clinton who went back to the old way, cutting capital gains rates.
There’s plenty of talk (most recently from President Biden) about bringing back equal taxes, but it hasn’t come close to happening. What’s close to happening instead is yet another handout to the retired rich.
More than two years ago, on April 13, 2020, Daily News readers came across this headline: “The coronavirus stimulus was a bonanza for well-off retirees.” The story was about required distributions from retirement accounts being waived for a year, including of course the taxes that come with them. The 2020 move was a blip, a temporary bonanza; what’s now on deck, needing only Senate approval, is a permanent three-year pushback. Instead of starting at age 72, taxable required distributions wouldn’t begin until age 75.
It’s the key provision in the Securing a Strong Retirement Act of 2022. Every Democrat in the House voted for it, the only nays coming from five Republicans. Daniel Hemel, a tax professor at the NYU School of Law, called it “a deeply cynical deficit-expanding giveaway to high-income taxpayers … Progressives and deficit hawks alike should say no to this gimmicky.”
Tax lawyer Robert Lord spoke to the corruption of the 1974 law that first established retirement accounts: “What started out as a well-designed program to help ordinary Americans…has been transformed by the financial industry, the rich people they serve, and those carrying water for them in Congress. Today, IRAs and retirement plans…function primarily as vehicles to further enrich America’s wealthiest.”
Figures compiled by the Tax Policy Center back up Lord’s claim: “[A]lmost 90% of tax breaks for retirement savings go to the highest-income 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 scam. It’s scored as revenue neutral, but it will cost billions in lost revenue outside the ‘budget window.’”
In the end, it’s just another slap in the face to tax fairness. Only the particulars make it any different from all the other slaps that already litter the tax code. (There’s already one more in the making, a bipartisan Senate cryptocurrency bill that includes “a huge tax avoidance opportunity for those involved in the crypto business.”)
Nothing is more subjective than taxes, and the conservative publisher Steve Forbes once offered his own special take: “The tax code is a monstrosity and there’s only one thing to do with it. Scrap it, kill it, drive a stake through its heart, bury it and hope it 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 rich ever had.
Gerald E. Scorse is a former Post-Journal staffer. This article first appeared at www.nydailynews.com
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