ProPublica recently reported that many wealthy Americans pay little or no tax at all. While there are obvious advantages to accumulating wealth and avoiding taxes, the U.S. tax code provides many avenues for evasion. Many of these fundamental flaws in the American tax code were present long before the 2017 Tax Cuts and Jobs Act gave out massive new cuts to the richest Americans and the biggest corporations. These flaws have contributed to an unprecedented rise in wealth inequality and a less vibrant economy.
The tax code is too complicated. Many families cannot afford expensive financial planners to navigate the tax code. They may not even be aware of all the hidden tax credits. The Alternative Minimum Tax is a dangerous measure, which could define the rich as people earning less than $80,000 a year. The tax system is also too complicated, and many people spend far more time than is necessary on filing their taxes. Even small business owners are frustrated by the complex requirements and rules in the tax code.
The tax system is not designed to collect taxes from the most wealthy Americans. Corporate profits have risen to 12 percent of GDP, while corporate tax revenues have stagnated at 2 percent. In addition, the U.S. government has failed to collect enough tax revenue to adequately fund social services. Hence, the tax system has become a means for corporations to avoid paying taxes and to keep their profits flowing to them.
Ultimately, a good tax system is equitable, efficient, and simple. However, the U.S. tax system is not in its ideal form. Tax reform is essential to pay for government spending, treat taxpayers fairly, and improve incentives for productive activity. The government should implement a value-added tax (VAT) and environmental taxes, which are currently absent in our tax code. And, it is important to remember that tax reform is a major investment in addressing income inequality.
The income tax has evolved significantly since the 16th Amendment. Today, most Americans have to pay federal income tax, and the government collects more than $500 billion a year in revenue, with an additional $117.5 billion from corporations. With the income tax, the tax code has gotten longer and more complicated, and more people grumble about paying their taxes than ever before. This is because the income tax is designed to penalize the wealthy.
The Billionaire Minimum Income Tax is the ultimate solution to this problem. It is a monetary policy aimed at ensuring that wealthy Americans pay at least 20 percent of their total income. This will ensure that ultra-high net worth households will no longer be able to avoid paying taxes for decades. This tax also ensures that the wealthy pay at least the same rates as teachers and firefighters. So, what’s Wrong With the American Tax System?