Time to Reform a Tax System that Favors the Wealthy

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It turns out Donald Trump has carried forward more than $900  million in business losses on his personal income taxes in 1995 and may not have paid taxes for up to 18 years, according to reporting by the New York Times.

What’s outrageous is not that Trump took advantage of existing tax law; it’s that a law allowing him to avoid hundreds of millions in taxes even exists to begin with.

Other provisions of our regressive tax code provide similar benefits to the wealthy and large corporations:

  • The owners of real estate can “depreciate” assets even if those assets are actually increasing in value;
  • Corporations can stash huge amounts of revenues overseas to avoid taxes, and
  • The incomes of hedge fund managers and other professional investors are taxed at lower “capital gains” rates than rates paid by hard working Americans on “ordinary” income.

These are just a few examples of a tax system riddled with loopholes that favor the rich.    But perhaps the most egregious provision of all is that dividend and capital gains rates top out at 20% whereas taxes on ordinary incomes go as high at 39.6%.

As a matter of basic fairness and common sense, the incentive (e.g. lower rates) should be on encouraging people to work hard, improve their lives and get ahead.

Instead, in today’s system, we discourage labor through high tax rates, but give huge breaks to people who invest in real estate or churn paper assets for a living.

In addition, since the Great Recession starting in 2008, an almost exclusive emphasis on monetary policy through the Federal Reserve Bank, including buying bonds and keeping interest rates low, has served primarily to inflate asset values while wages have stagnated for ordinary Americans.

These policies not only favor the wealthy.  They can lead to asset bubbles and put our entire economy at risk.

There is very little that comes out of “Lying Donald’s” mouth that remotely resembles the truth.  But Trump is “right on” in this respect –  the system is rigged and nowhere is that more evident than in our regressive tax system.

Democrats need to stand up and fight for tax fairness.  That starts not just with closing loopholes of the kind Donald Trump has used to avoid taxes.  It also means increasing the top rates on dividends and capital gains so the wealthy pay their fair share.