Why taxing the rich isn't enough

If you're reading this then I'm sure that you've also read the latest exclusive from The New York Times. That's right, aside from the $750 in his inaugural year, President Donald J. Trump hasn't paid a dime of federal income tax in the last decade. To many Americans, this is a clear indicator of what's wrong with this nation. The rich continue to get richer through tax loopholes and financial Abracadabra, while average Americans are working longer hours for lower wages. But, what if things were different? What if we banned inheritances, the rich paid enough, and stronger regulation on Wall Street, such as the Glass-Steagall Act, were back in place? I'd like to argue that it still wouldn't be enough.

It's easy to talk about taxation;

Someone that makes more can afford to pay more. At least that is how things are supposed to work. You pay your fair share of taxes and if you've paid more than what’s fair you get a big ol' tax return for overpaying. Dependents, donations, and whether you've fought for this country make your "fair-share" smaller. After all, why should you pay the same in taxes as someone with little expenses and no burden right?

Things start to change when wealthy corporations come to the table. Anyone that's worked a 9-5 understands that money doesn't grow on trees. No matter how much work, there is always a limit to how much income you can bring home at any point. For corporations, things are very different.

Corporations produce capital at a faster rate than individual citizens. It’s simple, money makes money faster than people make money. Aside from the millions in tax rebates, Amazon, for example, makes money every second of the day, whether it rains or shines. As Americans, we have a right to be angry every time we hear that a corporation or its owners paid $0 in taxes. A lot of sweat and sacrifice goes into filling the federal budget; Too many hours, too many working to get the short end of the stick.

When it comes to taxes, the assumption is that the more revenue we generate as a nation, the bigger the aid to citizens. Better roads, improved quality of life, healthcare, housing, and education for all. The bigger the budget, the more that we can do. Or the more that we should do.

But where do things stand right now?

for more information visit the Congressional Budget Office website

In 2019, the federal government spent $4.4 trillion; $3.5T from federal revenues, and borrowing covered those expenses. Individual income taxes contributed the most, while the least came from taxing corporations. Only $230 billion came from corporate income taxes. In 2019, Amazon made $280B in revenues and paid $0 because of a federal tax rebate. $2.13T was the sum of all corporate profits in 2019. Besides the $230B in taxes, $1.9T in profits went to dividends and into creating more wealth (individual and corporate).

The message is clear, the more you produce, the fewer taxes you pay. Since President Trump passed the Tax Cuts and Jobs Act of 2017 (TCJA), corporate taxes have gone down 14% from 35% to 21%. TCJA has made it easier for the wealthy to pay less on estate taxes and for corporate buybacks. It's been two years and, we're now feeling the negative impact. There are currently about 13.55M Americans unemployed. When COVID hit, corporations laid off millions and bought back billions in shares. Through the CARES Act, Congress has temporarily banned buybacks for corporations receiving aid. But it's still not enough. That is, the income tax, whether individual or corporate, is still not enough.

for more information visit the Congressional Budget Office website

Last year most federal funding went to health insurance, social security, and national defense. The least went into healthcare, education, transportation infrastructure, Science, and medical research. We weren't, and in many ways, still aren't prepared for this pandemic. We have the third-largest population in the world but the highest cases of COVID.

When it comes to this pandemic, both parties are to blame. While economic conservativism allowed the curve, liberalism has made it difficult to flatten. We've chewed much more than we could swallow this year. A war against hate, unpacking systemic racism, unemployment, and the death of (RIP) Justice Ruth Bader Ginsberg. Let's not forget that we're still in a pandemic and have an upcoming election, oh, and Trump's taxes. That's what started this whole conversation. I had promised that I'd explain why taxing the rich wasn't enough.

Here's the truth

An increase in the federal budget does not equal improvement in the American quality of life. But by lowering the tax burden on everyday Americans, we put ourselves in a better position to do so. Raising corporate taxes back to 35% would get the ball rolling. Creating stricter penalties for anyone storing profits offshore in tax havens also helps. But even if we did it all, it still wouldn't be enough.

The problem with America isn't a lack of capital, but instead how we distribute it. If our budget increases but distributions remain the same, we won't see much of a difference. Yes, the pie will be bigger, but the quality of life, for the most part, will remain unchanged. Last year our government used $676B of their $1.3 trillion in discretionary spending on defense. Of all non-defense expenditures, only $66B went to healthcare. $136B of those expenses went to Science, technology, agriculture, housing, energy, and others. While $375B went to paying interest on the national debt, an estimated $95B was paid for education and training. It's why COVID hit us so hard. We spend more on health insurance than actual healthcare.

The bottom line is until we change how we spend, more specifically, how our government spends, things will never change. We can, and should, tax corporations at higher rates, but it won't mean a thing unless we change our spending habits.