Close the Wealth Inequality Gap
It’s no secret that America is seeing ever-increasing wealth and income disparity. Hard working Americans pay disproportionately high income tax, while taxes on those at the very top are too easy for them to dodge.
For America’s capitalist society to work as it should, we need to close the wealth inequality gap. More disposable income for working people means increased demand for goods and services, which in turn leads to more new jobs and increasing wages. When working people’s wages go up, it starts this cycle of increasing prosperity for all.
Trickle-Down Economics Dried Out a Long Time Ago
At today’s historically low level of business taxation, the super-rich will still not allow their excess wealth to trickle down. TV pundits love trickle-down talk because it’s an easy image to describe and sounds like common sense. But in the real world, wealth accumulates at the top and stays there. Nowadays the flow of wealth goes in one direction: towards the top.
The only thing trickling down nowadays is the stress of an unbalanced economy on working Americans. People are working harder for stagnant wages while the cost of living keeps rising. It wasn’t always this way. Wealth flowed from the top down and back up again in the golden age of American business and industry, when the highest marginal tax rate was as high as 94%. It was 70% before Reagan lowered it to 40%.
The Great American Middle Class
But if Uncle Sam historically took as much as 94% of earnings in the highest tax bracket, how could a business owner afford to create new jobs? How did the middle class grow and thrive? Here’s how: rather than paying 94% tax on income in the prohibitively highest bracket, the wealthiest business owners were incentivized to reinvest that income by creating new goods, services, and jobs. It was in their self-interest to infuse their wealth back into the business rather than to pay it to the federal government in the form of an impossibly huge tax bill. That reinvestment, growth, and job creation laid the groundwork for the great American middle class. What we have now, in contrast, looks increasingly dire for working Americans: the rich get richer while no one else can keep up with the skyrocketing cost of living.
Fix the Tax Code
As your representative, I would advocate for these tax code fixes:
- Middle-income earners deduct 100% of childcare, healthcare, and higher education expenses.
- Drastically simplify the tax code: surely we do not need thousands of pages of tax codes. We should eliminate most other deductions and contract our categories into four progressive brackets of 10%, 15%, 20%, and 25%. These brackets would be applied to income earned by 99.5 % of Americans.
- Two corporate brackets: 15% and 20%.
- For the upper 0.5% of earners, we should return to a substantially higher rate of taxation on personal income, similar to the high progressive rates of decades past. I propose five additional progressive brackets. Even if you’re a successful small business owner, I think you’ll like what you see. Earnings between $470K and $2.5M per year would see some tax relief compared to the current 39.6% bracket. Those earning more than $10M annually would be taxed at a higher rate on income above $10M:
- Income exceeding $1M/year, 30% of the amount between $1M and $2.5M/year (similar to the Buffet Rule)
- Over $2.5M/year, 40% of income between $2.5 and $10M
- Over $10M/year, 50% of income between $10M and $25M
- Over $25M/year, 70% of income between $25M and $50M
- Over $50M/year, 90% of income greater than $50M