Short answer: the average taxpayer! The latest data indicate that only 7% of tax revenue comes from corporate taxes and 4% from excise taxes and tariff. The remaining 86% is paid by individuals, 50% in personal income tax and 36% in Payroll taxes. The FICA (Federal Insurance Contributions Act) tax is capped at $132,900 (2019) and so is inherently unfair in that earners making more than that do not pay any additional FICA. Any recent decrease in personal income tax, for the lower end households, has been offset by increases in payroll taxes. Add to that the fact that higher earners are paying less personal taxes than ever and we can see the unfairness of taxation and the reason that our treasury is so in debt and our schools and infrastructure failing.
It is not just partisan politics which suggests that Trump’s Tax Cuts and Jobs Act of December 2017 has aggravated the problem, it is “actual fact.” The highest personal income rate in the 20th century was 91% and it dropped, by 1980 to 47%, and is currently 37%. The wealthiest 400 households paid an all-time record low percentage of 23% in 2018. In other words, personal income tax has become “radically less progressive (Leonhardt). Corporate taxes fell 31% from 2017 to 2018, under the Trump reform, which reduced their statutory rate and also allowed for the full value of equipment purchases to be deducted. At least 60 of the Fortune 500 companies paid exactly NO tax last year. Some of these companies are well-known household names such as Amazon, Netflix, Delta Airlines, Jet Blue, Whirlpool, Eli Lilly, Halliburton, GM, IBM, Chevron, and Goodyear. Trump’s tax reform also ended deductions for state and property taxes resulting in a significant decrease in property values. Finally, the 4000 dollar pay increase that Trump said would hit the average worker never materialized.
The manner of taxation is an integral part of a Democratic system. Even before the inception of the nation, tax structures were hotly contested. The northern colonies favored a more progressive tax than existed in Europe while the southern colonies were hostile to taxes fearful that they would undermine slavery. But history has offered optimism in that when there was a will to raise taxes it was accomplished. Today’s miserly tax code is directly due to reforms in Trump’s 2017 program. It has been suggested, by two UCB professors, that increasing the personal tax rate to 60% for the top 1% of households would increase revenues $750 billion a year. They also propose a minimal global corporate tax of 25% (see Leonhardt). These would allow for a much needed infusion of funds for infrastructure, education, and health care. Activist organizations, electoral pressures, and good media coverage can significantly impact the voice of fairness with regard to taxation.
This Brief was submitted by USRESIST NEWS Analyst Rosalind Gottfried
Photo by The New York Public Library