Taxes on the Rich: One-Sixth of What They Used to Be

Chuck Collins and Bob Lord summarize the radical tax transformation in the U.S. over the past 65 years, particularly since 1980. 

Mural by Megan Wilson on Clarion Alley in San Francisco, 2014. (Victor Frigas, CC BY-SA 3.0, Wikimedia Commons)

By Chuck Collins and Bob Lord

America hasn’t stopped taxing its wealthiest citizens entirely.

But that’s where we’re headed.

According to a new IPS briefing paper, the richest .01 percent of Americans, about 33,000 lucky souls today, now pay just one-sixth of what they used to pay in tax, when measured as a percentage of their total wealth.

The top .01 percent in America is a phenomenally wealthy group. Even during America’s most egalitarian periods, the average member of the top .01 percent held over 200 times the wealth of the average American. Today, the wealth of the average top .01 percenter is nearly 1,000 times that of the average American and is closing in on one billion dollars.

Hence, it doesn’t matter to the top .01 percent what type of tax they pay, be it income, sales, property or anything else. Taxes don’t influence their spending decisions or such mundane things as how many hours they work, when they retire, or whether their spouse must work. For a group whose poorest members are worth more than $100 million, the only impact any tax has is its impact on their wealth–and tax payments decrease the rate at which their wealth grows.

America’s radical tax transformation occurred over the last 65 years. The process started slowly between 1953 and 1980. It took 26 years for tax payments by the top .01 percent to fall by one-third from their 1953 peak. But starting in 1980, tax cuts for the wealthiest Americans have followed a clear pattern: When Republicans have held power, tax cuts for those at the top have been slashed; When Democrats have held power, they’ve enacted a few slight tax increases, but mostly have maintained the status quo.

The result has been a systematic shift in America’s tax policy, with taxes on wealth moving inexorably lower and taxes on work moving inexorably higher. As economists Emmanuel Saez and Gabriel Zucman have reported, the country has moved from a progressive tax system to one where the overall tax rate, as a percentage of income, is lowest for the very wealthiest of us. That’s bad enough. When we view the policy shift through the lens of taxation of wealth, as the IPS briefing paper does, it’s far uglier.

Effectively, taxes on the ultra-wealthy have nearly been eliminated. The members of the top 0.1 percent pay only one-sixth of what they paid a half century ago in taxes.  What used to be paid every two months is now paid every twelve.

And there’s no sign this trajectory is changing.

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The views expressed are solely those of the authors and may or may not reflect those of Consortium News.

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6 comments for “Taxes on the Rich: One-Sixth of What They Used to Be

  1. February 18, 2021 at 18:10

    If asked I think most Americans would agree that a society with a smaller disparity between the wealthiest and the poorest would be a better society. That does not mean that those who create wealth for the rest of us should not be rewarded. But it does call for some proportionality, e.g., a twenty to one ration between the the president of the corporation and the janitor. The way such ideas are parried is to be told that is simply envy, and whatever the president can get more power to him. The rest of us are free to do the same. We are taught in a hundred ways not to blink when an athlete earns a hundred times what a mechanic earns. In fact we tell ourselves he or she is worth 100 times the mechanic. The mechanic most likely thinks that is the way of the world.

    Perhaps it is unrealistic to expect otherwise, a society with norms of greater fairness and equality. Perhaps the simplest way to approach such inequality is through the tax system. Not the best way, perhaps, but the most workable one

    How far we have come in our views of equity and fairness since the 1950’s when we had a healthy society and millionaires paid their fair share, as fair was defined by our society back then.

  2. Vera Gottlieb
    February 18, 2021 at 09:30

    65 years??? Goes to show the power of money…

  3. Rodion Raskolnikov
    February 18, 2021 at 09:02

    “Effectively, taxes on the ultra-wealthy have nearly been eliminated. ”

    Many very wealthy corporations and individuals actually pay no tax at all. They have, therefore, a huge competitive advantage against their competitors since taxes are not part of their operating costs. This is how Amazon has grown so big.

    The refusal to tax the rich is a huge problem. It is destroying the US. The governments in Washington and all state capitols function in reality as agents of these untaxed oligarchs — but all the bills are paid by the working class of average income people. This is the fertile seedbed of revolution. That’s exactly why the US governments at all levels are armed to the teeth against their own people. They cannot expect to steal from the masses forever. Someday, there will be a pushback. The oligarchs know this and they are getting ready. The coming new anti-domestic terrorism bill is just one step against the future uprising of the exploited class.

  4. Vera Gottlieb
    February 18, 2021 at 04:27

    And the day will come when the rich will be made to pay their dues…in a different way.

  5. Jonny James
    February 17, 2021 at 18:02

    While at the same time, the distribution of income and wealth has become more unequal than ever. The top .01% have accrued most all of the national income since the crash of 08 and the introduction of TBTF banks and unlimited QE.

    Private aggregate debt is back at record levels. Student loan debt, credit card debt, corporate debt, Because folks are forced to go into debt due to education costs, health care costs etc. more of their dwindling income goes to debt service.

    Neoliberal/neoclassical economic theory (what Prof. Michael Hudson calls “Junk Economics”) promotes more privatization, no taxes on the super-wealthy, anti-labor policies etc. – these all work together to bring us a highly polarized, unequal economy and society. It’s getting worse every year, and now the pandemic has put the process into overdrive. The homeless population is skyrocketing.

    We need a financial transaction tax on the national level immediately.
    We need to tax capital gains at the same rate or higher than labor income.
    We need to reinstate a heavily progressive income tax like back in the Eishenhower administration, for example.
    We also need a real-estate tax on large land owners. (rentier tax)

    We need to write down the unsustainable (and largely fraudulently induced) debt now. Biden just said no to writing down even a portion of the extortionate, high-interest student loan debt. He is doing the opposite of what needs to be done to please his Wall St. puppet masters.

    We also need to create state and local public banks and nationalize “the Federal Reserve” to make it accountable to the public, not a tool of Wall St. financial dictators.

    That would be a good start…

  6. Donald A Thomsn
    February 17, 2021 at 17:17

    How could it change? The New York Times reported last year that Biden promised the Democrats’ billionaire owners that, if he was elected, nothing would change for them. No Democrat voters cared in the slightest. The only difference on billionaire taxes between the USA’s major parties is that Republicans act because of their economic beliefs while Democrat politicians act because they’re corrupt. Their electors care about virtue signalling, not performance.

    Who have the Democrats elected? Biden and Harris, both typical machine politicians. Both will retire rich, that’s their only motivation and they don’t care who knows it. The Democrats control the House, the Senate and the Presidency. They will find a way to say they’re powerless because they want to be seen as powerless to do anything.

    The usual way is to pretend that the Senate filibuster is something more than a voluntary procedure. It will be kept by only enough Democrat Senators voting for it. A large majority of the Democrat Senators will vote against it but that’s just theater. They all support it but there’s no point in making it obvious and every Democrat voter will fall for the trick. Every media employee of a billionaire will complain about the Democrat few supporting the evil Republican majority but they won’t mention it at the next Senate election.
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