Principles for Tax Reform

Albin Lohr-Jones/Sipa via AP Images

A demonstrator holds a sign at a rally in opposition to the Republican tax bill held in Lower Manhattan in New York

This article appears in the Summer 2018 issue of The American Prospect magazine. Subscribe here

Tax Fairness: Corporations and the Wealthy Should Pay Their Fair Share

REPEAL ALL CORPORATE PROVISIONS OF THE TAX ACT. The idea that corporate rates were too high was always phony. Even at the old rates, the United States had one of the lower net rates of corporate taxation among OECD nations. 

RESTORE THE TOP MARGINAL RATES ON INDIVIDUALS, and add a new surtax rate of 50 percent for incomes over $1 million. During the boom years after World War II, the top rate was never below 70% and the economy flourished.

REPEAL PROVISIONS OF THE LAW INTENDED TO PUNISH CITIZENS in states with decent public services, such as the cap on deductibility of state and local taxes. At the same time, cap the mortgage interest deduction and use the savings to finance more affordable housing.

TAX INCOME FROM WEALTH THE SAME WAY WE TAX INCOME FROM WORK. Eliminate all preferential tax treatment for income from dividends and capital gains. That reform also reduces inefficient economic activity intended purely to game the tax system.

RESTORE A ROBUST TAX ON LARGE INHERITANCES both to increase tax fairness and to curb dynastic wealth.

Fighting Abuses: Crack Down on Cheating and Gimmicks that Benefit the Rich

END PROFIT-SHIFTING AND OFFSHORE TAX EVASION by taxing all corporate profits based on the location of final sale. That way, corporations save no tax money by playing accounting games about where profits are nominally booked. Tax foreign corporate profits the same as domestic profits.

REQUIRE ALL OWNERS OF ASSETS TO DISCLOSE THE TRUE OWNER, irrespective of dummy corporate shells and trusts.

RESUME INTERNATIONAL LEADERSHIP OF A COMMON EFFORT TO SHUT DOWN TAX HAVENS. Transactions should be prohibited with any country that refuses to disclose true owners of assets to tax authorities. Banks that collaborate in asset-hiding schemes should be subject to criminal prosecution as money-launderers.

RESTORE ADEQUATE FUNDING TO THE IRS, with an explicit mandate to investigate complex tax evasion and asset-hiding schemes.

END ARTIFICIAL DEPRECIATION BENEFITS for owners of commercial real estate.

END ALL TAX SUBSIDIES OF OIL, GAS, AND OTHER EXTRACTIVE INDUSTRIES.

END THE “CARRIED INTEREST” SPECIAL TREATMENT of hedge fund profits and tax them as ordinary income.

Revenue Adequacy: Restore Tax Equity to Finance Public Needs

IDENTIFY NEW SOURCES OF REVENUE THAT ALSO TARGET ABUSES. Two good ones are a Wall Street sales tax (“Tobin Tax”) on short-term financial transactions and a carbon tax. Use credits to offset the regressive aspects of a carbon tax.

RESTORE ALL PROGRAM CUTS BASED ON THE $1.9 TRILLION INCREASE IN THE DEFICIT caused by the Tax Act.

SECURE ADEQUATE REVENUES TO ASSURE FUNDING OF CORE PROGRAMS such as Social Security, Medicare, and Medicaid, and to make new investments in affordable higher education, infrastructure, early childhood education and child care, and transition to a green economy.

 

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