Americans deserve an economy that, at a minimum, has fair and equitable rules and that guarantees them enough stability to afford their basic needs. And over the past week, Americans are now two steps closer to getting that sort of economy, thanks to new legislation introduced on Capitol Hill.
In case you missed it, last Thursday, Senator Chris Van Hollen (MD), Senator Mark Kelly (AZ), Representative Don Beyer (VA-08), and a number of their congressional colleagues introduced the Working Americans’ Tax Cut Act. This bold yet surprisingly simple piece of legislation creates an affordability tax cut for working people paid for by millionaires like us. It is also the second component of our very own legislative platform, The MONEY Agenda.
Just five days later, Senator Edward Markey (MA) went on to introduce the first component of our MONEY Agenda—the Equal Tax Act—in the Senate. This landmark bill makes the tax code more equitable by taxing investment income at the same rate as ordinary labor income and by closing common loopholes used by the wealthy to avoid paying their fair share in taxes. It is the Senate companion to the House version of the bill introduced by Congresswoman Delia C. Ramirez (IL-03) in September.
For this week’s Closer Look, we want to share more about these bills and why they are sorely needed to get our economy on a better path. We’ll start with the Equal Tax Act and then move to the Working Americans’ Tax Cut Act. We’ll close by offering broader reflections on both bills and the rest of our MONEY Agenda.
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Short on time? Here’s what you need to know:
- The Equal Tax Act was introduced in the Senate yesterday. It is the first part of Patriotic Millionaires’ legislative platform, The MONEY Agenda. It would establish basic fairness in our tax code by taxing labor and capital income at the same rates and closing common loopholes used by the wealthy to avoid paying their fair share in taxes.
- The Working Americans’ Tax Cut Act was introduced in the Senate and House last Thursday (March 12). It is the second part of our MONEY Agenda. It would immediately stabilize the economic lives of working people by creating an exemption for federal income taxes up to the cost of living for low- and middle-income Americans and shifting the responsibility for the lost revenues onto taxpayers with incomes over $1 million. It received a great deal of attention in the press, including hits in CNBC, CBS News, Bloomberg, and The Washington Post.
- The rest of our MONEY Agenda is needed to establish a constructive, sustainable relationship between businesses and workers and to protect our economy and democracy from the threats posed by extreme wealth concentration.
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Equal Tax Act
Senator Edward Markey, along with Senators Bernie Sanders (VT), Cory Booker (NJ), and Jeff Merkley (OR), introduced the Equal Tax Act (ETA) in the Senate on March 17th. In full, the ETA does the following:
- Limits the lower preferential tax rate for long-term capital gains and dividends to incomes under $1 million.
- Ends the stepped-up basis loophole and disrupts the “buy, borrow, die” strategy used by wealthy families to avoid taxation by treating capital gains as realized at the time of gift or death, with exclusion allowances of up to $1 million in gains.
- Enacts a lifetime limit of $1 million on the use of like-kind exchanges on real estate gains.
- Limits the pass-through deduction to incomes under $1 million.
- Offers generous protections for family farms and businesses.
The ETA will ensure basic fairness in our tax code through all of its provisions, but particularly by limiting the lower preferential tax rate for long-term capital gains to incomes under $1 million.
Most Americans make their money through their own labor—that applies to teachers, home health aides, fast food workers, construction workers, and more. On the other hand, rich people like us typically make money through capital gains, which are the increase in value of assets like stocks, bonds, real estate, and art over their original purchase price. Under our current tax code, capital gains are taxed at a much lower rate than traditional labor income: the top marginal rate for labor income is 37% but only 20% for long-term capital gains (those are assets held for over a year and then sold).
Here’s what this means in practice: A wealthy investor can make $70,000 in one second by pressing a button on their phone’s E*TRADE account to sell some stock. Yet they will pay less tax on that $70,000 than the $70,000 an ER nurse makes in a year working overnight shifts, or the $70,000 a dental hygienist makes in a year cleaning teeth day in and day out, or the $70,000 an elementary school teacher makes in a year after spending $895 of their own money to supply their classroom.
The preferential treatment of capital income over labor income is both intellectually indefensible and grossly unfair. At the end of the day, money is money is money is money regardless of how you make it. There is no reason why money earned passively from wealth should be taxed any less than money earned actively from blood, sweat, and tears. And don’t listen to anyone who says that investors need lower rates as incentives to invest—they’re wrong. What else are we going to do with our money? Stick it in a mattress somewhere? The last we checked, mattresses do not provide very high returns.
That’s why we’re so thrilled to see the ETA come to life in both the House and now the Senate. To learn more about the bill and its importance, watch a recording of the September press conference of the House introduction of the bill here, where several of our members delivered remarks.
Working Americans’ Tax Cut Act
Since its introduction last Thursday, the Working Americans’ Tax Cut Act (WATCA) has made quite a splash in the media—more like a tsunami, really. The bill has been spotlighted in a myriad of high-profile outlets, including CNBC, Forbes, CBS News, Bloomberg, The Wall Street Journal, MarketWatch, and The Washington Post.
WATCA eliminates federal income taxes for individuals making less than the median cost of living in America for a single adult with no children (approximately $46,000 a year). It would give more relief to married couples filing jointly and heads of household, and also provides modest relief for households at 175% of the median. The bill is funded through a modest graduated surtax on annual incomes over $1 million. The Institute on Taxation and Economic Policy estimates that no fewer than 130 million Americans would receive tax relief through the bill.
The idea behind WATCA is simple: the federal government should not tax people into, or further into, poverty. If you can’t afford your basic needs, you shouldn’t be required to pay federal income taxes. That’s it. If lawmakers can’t be bothered to raise the federal minimum wage to a living wage or do something meaningful to stop corporations from needlessly price gouging consumers, this is the least they can do to ensure working people’s economic stability.
WATCA could not have come at a better time for the millions of Americans suffering in our national affordability crisis. We told you last week about how prices for essentials like food, rent, utilities, and healthcare are on the rise, and how people’s wages aren’t keeping pace. Now, prices are expected to only continue rising because of the ongoing conflict in Iran. Throughout his second term, President Trump hasn’t missed an opportunity to brag about the fact that gas prices are lower under his watch. And he was actually telling the truth for once—until now. As of this writing, the three-week war in Iran has caused average gas prices to increase by 30% to $3.86 a gallon. Diesel prices are also on the rise; given diesel’s importance in fueling the global supply chain, this will eventually cause price hikes for things like groceries, deliveries/shipping, and airline fares.
On social media last week, Trump said, “The United States is the largest Oil Producer in the World, by far, so when oil prices go up, we make a lot of money.” By “we,” he certainly can’t be referring to the millions of Americans that are already suffering at the gas pump because of his unpopular foreign policy decisions. But he might have meant the ultra-wealthy fossil fuel executives who stand to reap billions from it all—and who already enjoyed a separate bonanza from Trump’s One Big, Ugly Bill.
To learn more about WATCA and the ways it could help ease the financial pain being felt by Americans, watch a full recording of last week’s press conference introducing the bill here. At the 29:45 mark, you can listen to the remarks that our Chair, Morris Pearl, delivered in support of the bill.
Conclusion
Pretend that America’s economy is a soccer game for a minute. The ETA makes sure that the rules of the game are fair and that the wealthy players don’t get any undue advantages over the poorer ones. WATCA, meanwhile, makes sure that everybody who wants to play the game has enough stability in their legs to stand, walk, and run on their own two feet to do so.
These two bills will go a long way in making our economy work better for everyone in America, not just wealthy people like us. But even if they pass, our work to achieve economic justice is not done. There are other parts of The MONEY Agenda that we are determined to get over the finish line as well. Specifically, we want to motivate corporations to pay their workers living wages and, in so doing, establish a constructive, sustainable relationship between businesses and workers. We also want to begin the critical work of using the tax code to protect our economy and democracy from the threats posed by extreme wealth concentration.
We’ve said it before, and we’ll say it again: we’re not doing all of this out of the goodness of our hearts. We created our MONEY Agenda and promoted it on Capitol Hill not out of benevolence for the millions of struggling workers around the country, but because it is in our own self-interest to do so. Because the only way for our economy and democracy to stay afloat is if everyone has the opportunity to get ahead.
Our Chair, Morris, says it best: “I’m not any more altruistic than the next guy. I’m just greedy for a different kind of country.”