[In honor of Tax Day, we’ve decided to release an excerpt from Tax the Rich! How Lies, Loopholes, and Lobbyists Make the Rich Even Richer by Morris Pearl and Erica Payne. Order your copy today!]
There’s a reason that rich people and politicians focus most of their attention, their lies, and their behind-the-scenes manipulation on our tax code: it’s one of the single most important building blocks of our country’s political economy, and it’s where “rigging” can generate the highest returns. People think taxes are just the way we pay for things we all need, but our tax system is much more than that.
Our tax system is the primary mechanism through which everything produced in our economy is ultimately divided up. Even small changes to the tax system can have major effects on how the benefits of the economy are dispersed across the population. Whoever controls the tax system controls the distribution. Because millionaires and billionaires and corporate lobbyists currently have the most power in the political arena, they are the ones controlling the tax system and deciding who gets the biggest payout from the economy. They can rig the tax system so it delivers outsized benefits to them, even if it destroys the lives of millions of our people in the process.
Most people understand taxes as the way we pay for things that we decide are easier or better to do together. And because people inevitably disagree about what exactly those things should be, conversations about our tax system invariably turn into arguments about what we should and should not be paying for and who’s a freeloader and all that. But just talking about what expenses we should share misses the bigger point.
Whatever we decide to do together, those things need to be financed, and the way we finance them matters. (Please note the use of financed rather than paid for! The federal budget is not like a state budget or a family budget where there’s a direct link between how much money you take in through taxes and how much money you are able to spend on things your citizens need.) Creating a system where those with little to spare are responsible for most of the investment, while those with the most put up the equivalent of nothing, is nuts. It makes much more sense to require the people who have clearly benefited the most from our system to reinvest a huge percentage of their excess wealth back into that system. Please keep in mind that the people we want to tax, the people who are reaping the vast majority of the benefits of our economy, have so much money that taxing them at rates of 70%, 80%, or 90% won’t change their lives at all. Don’t worry, Ken Griffin; when we’re done taxing you, you’ll still be able to afford your $238 million New York City apartment, your $122 million mansion near Buckingham Palace, and your $100 million Hamptons estate.
Beyond financing our society’s shared priorities, we also use tax policy to encourage and discourage various behaviors. As a parent, I understand incentives and disincentives as well as anyone. If you eat all your vegetables, you can have dessert. If you pull Big Kitty’s tail again, you will go for a time-out. The incentives in my household are very clear. The incentives in our tax code are also very clear; they’re just dumb.
Did you know that companies that move American jobs to other countries get a tax break? Did you know that our tax code lets people pretend to be businesses so they can get a tax break? Did you know that people who work for the industry that is responsible for millions of layoffs pay a tax rate that’s about half of what working people pay? Please read those sentences again. They are true. We’ve built a system that rewards people for doing all the things we say we don’t want them to do. Why? Because politicians aren’t working for America; they’re working for their political donors. It’s as simple as that. But don’t trust me; the politicians have admitted it publicly!
As any parent will tell you, if you reward bad behavior, you’re going to get more of it. Thanks to a broken political system, we’ve been handing out treats to the rich and powerful for so long, they have turned into spoiled brats. I wouldn’t deal with this much whining from my five-year-old. Why on earth do we tolerate it from adults who should know better? America’s billionaires have gotten to the point where they think they can do whatever they want and still get special treatment. On the rare occasion that someone calls them out on their greed publicly, they go on television and cry about being persecuted. Yes, Steve Schwarzman, we are talking to you. No, paying taxes is not tantamount to the Nazis advancing across Europe. You need a billionaire time-out.
Everything—from how much money you bring home to how good your kid’s school is to whether or not you die of COVID-19—is partially dependent on how the economy is structured, and the tax system composes much of the structure of the economy. Providing incentives and disincentives, financing the things we need, fairly splitting the tab—these are not just elements of the country’s political economy; they’re the primary structural elements of the system that controls almost every aspect of our existence. If the architecture of your house were this faulty—if your house had a framework this unstable—you would not allow your family to sleep there.