The wealth of America's billionaires soared to $5.1 trillion in 2021, up $2 trillion since the beginning of the pandemic. Yet, we know a lot less about how much the top-earning Americans pay in federal income taxes today than we did even a few years ago.
Exposing how little in taxes the richest Americans contribute to the common good could fuel increased public support for raising taxes on those at the top to pay for things like child tax credits, expanded day care, and climate change mitigation.
Biden administration officials should use every tool in their executive toolbox to shine a brighter light on the rampant tax avoidance of the wealthiest Americans.
One easy first step: reinstate an annual IRS report on the income earned and taxes paid by the nation's 400 highest-income taxpayers. President Trump terminated this publication in one of his first official acts.
As a result, in 2021 when White House economists wanted to provide information on taxes paid by the rich to inform the debate over President Biden's revenue proposals, they had to rely on estimates based on multiple sources. Their findings were still shocking. They estimated that the average federal income tax rate of the 400 highest-earning Americans was just 8.2 percent between 2010 and 2018.
But why rely on estimates, when the IRS could simply provide actual data, as they did between the early 1990s to 2017? In addition to hard numbers, data in the IRS report that Trump eliminated would also allow us to know the shares of national income, capital gains, pass-through business income, and much more garnered by these privileged few.
The IRS's last report on the richest 400 taxpayers, published in 2017, covered the years 1992 to 2014. Because tax returns can be amended for three years after they are filed, the 2017 report provided information for tax year 2014.
What did that data show? In 2014, the top 400 taxpayers each reported more than $126,833,000 in adjusted gross income. As a group, this tiny sliver of taxpayers, representing just .0000027 percent of total filers that year, reported 1.3 percent of income reported on all U.S. tax returns. In contrast, in 1993, the top 400 taxpayers accounted for just 0.5 percent of income reported on all returns.
Collectively, these 400 taxpayers reported $127.1 billion in income and paid $29.4 billion in federal income taxes, an effective tax rate of 23.1 percent.
The top 400 taxpayers in 2014 reported $82.8 billion in capital gains, an astounding 10 percent of the capital gains reported on all 149 million tax returns. They also reported $5.7 billion in income from S-Corp and Partnerships, known as pass-through businesses, almost 5 percent of the total income from this source on all the nation's tax returns.
That Trump suspended the report in 2017 was hardly a surprise, given his determination to lower taxes on wealthy people like himself. Later that year, the president's tax reform bill slashed the corporate tax rate from 35 percent to 21 percent, making stocks owned by the wealthiest Americans worth far more and allowing owners of pass-through business to exclude 20 percent of that income from taxation.
In short, the Trump tax bill was a bonanza for the nation's 400 highest-income taxpayers (as well as tens of thousands of their pals a bit further down in the rankings).
If Trump hadn't ended the report, we would have been able to get clear data on the outsized impacts of these tax cuts on the Top 400 in the report the IRS would have published this year.
But it is not too late. President Biden can, and should, reinstate this report. Compiling the income reported and taxes paid on 400 tax returns is not a heavy lift, especially when considering how important the data could be in the fight to finance public investment priorities.
Exposing how little in taxes the richest Americans contribute to the common good could fuel increased public support for raising taxes on those at the top to pay for things like child tax credits, expanded day care, climate change mitigation—and maybe even more resources for the IRS to crack down on wealthy tax cheats.
This content originally appeared on Common Dreams - Breaking News & Views for the Progressive Community and was authored by Scott Klinger.
Scott Klinger | Radio Free (2022-02-09T17:48:08+00:00) We Must Reinstate the IRS Report on the Richest 400 Americans That Trump Axed. Retrieved from https://www.radiofree.org/2022/02/09/we-must-reinstate-the-irs-report-on-the-richest-400-americans-that-trump-axed/
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