INDEX OF IDEAS

1. Income tax brackets
2. Compensation packages
3. Non-estate asset transfers
4. Unsecured loans
5. Carried interest
6. Billionaires Income Tax Act

Before getting into the details of overdue tax reforms, it is important to understand why these ideas are not widely discussed.

The 2010 Citizens United v. FEC case addresses who can contribute money and it is predicated upon the idea that “money talks”. Consequently, the aptly named “dark money” of wealthy corporations can be infused without limits. It follows that money can be used to effectively drown out free speech. This is why billions of dollars are now spent on political campaigns, which go into the pockets of the very wealthy owners of the media companies.

However, free speech cannot be drowned out if traditional and non-traditional media companies are required by law to provide equal time to candidates; at no cost. In other words, the Communications Act must be revised by Congress to further ensure equitable representation.

Purported dissenters of the Citizens United v. FEC ruling, led by Senator Bernie Sanders, decided that rather than proposing to legislatively solve the root cause of this serious money problem with a bill aimed at delivering more equitable media coverage, they promoted the idea that morally corrupt grassroots movements must infuse even more money into politics. This calculated response to Citizens United v. FEC has transformed the concept of being politically active in America. Instead of pushing back, Bernie Sanders and others embraced the idea of having more money in politics, while at the same time expressing the required dose of ongoing outrage about dark money.

As a direct result of this shameful retreat, politics have become more polarized because now the act of promoting any change is met with the reality of escalating campaign costs that are needed to present any candidate or policy. It is also no longer good enough to be informed, pay taxes, and discuss politics from time to time. Today, democracy calls for financial investment as reflected in each and every email, text, and mailout that is now accompanied with the ubiquitous “Donate” button. Sadly, political donate buttons are also drowning out urgent donation appeals by people who are ill or struck by personal tragedy without a safety net.

Instead of drafting legislation to help level the playing field, Senators and members of Congress have welcomed the influx of political spending that further insulates them from the day-to-day demands of a healthy democracy. Consequently, any semblance of political opposition is often limited to threats of a government shutdown that most severely punishes the people who most depend on government, while not at all impacting the pocketbooks of those in Congress.

President Jimmy Carter said, “The test of a government is not how popular it is with the powerful and privileged few, but how honestly and fairly it deals with the many who must depend upon it.”

Although Jimmy was not everyone’s favorite President, even his harshest critics do not dispute that he was a good man who promoted progressive legislation. Ideas, not outrage, are passed into legislation. Legislation can be passed to require that each media company airing sponsored political messages deliver near-equal airtime during closely paired time slots (within a 5% margin) at no-cost to each candidates’ committee on a daily basis. By instituting these Communications Act refinements throughout the year and not just during campaign cycles, the effects of escalating and disproportionate political campaign funding would be addressed. However, this type of legislation will not likely come from Bernie Sanders.

As touched on earlier, some very wealthy individuals are solely concerned with reduced tax rates, increased write-offs, and limited taxation in foreign jurisdictions, having no concern for the American wealth gap and the fallout of such policies on American domestic operations, jobs, social services, and the national debt. However, the Patriotic Millionaires organization claims to be different. They proposed H.R.5336, which states that it will “equalize treatment of capital gains with earned income” and offer “preferential rates for dividends and capital gains limited to incomes of $1M or less.” Unfortunately, H.R.5336 fails to address several well known taxation policies that favor the very wealthy and in some cases the bill squeezes those it claims to empower.

Important distinctions between usaequitabletax.org and H.R.5336:

1. The Patriotic Millionaires bill limits relatively low capital gains tax rate eligibility for individuals to $1M per year, which can negatively impact the sale of investments in support of personal retirement goals. Furthermore, the "buy-borrow-die" strategy (discussed in the proposed "Billionaires Income Tax Act") enables the wealthy to sidestep capital gains, which potentially renders the proposed $1M cap on the capital gains tax rate irrelevant to the wealthy class.
2. The Patriotic Millionaires bill does not present a solution to how trusts are used by some very wealthy individuals as a means of minimizing estate taxation.
3. The Patriotic Millionaires bill does not address the issue of how an individual can receive unlimited sums of money tax-free through trusts and other gifting strategies.
4. The Patriotic Millionaires bill provides little guidance about how its policies should be indexed for inflation. For example, the only reference to inflation adjustment includes the following confusing statement that references calendar year 2016 for some unknown reason: "(B) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting in subparagraph (A)(ii) thereof ‘calendar year 2025’ for ‘calendar year 2016’"
5. To become a member of the Patriotic Millionaires organization a member must have at least $5M in assets or $1M in annual income.
6. The Patriotic Millionaires bill does not address how non-profits can, in addition to serving as tax shelters, help generate tax dollars for public services like health care.
7. The suggested annual contribution/donation to be a member of Patriotic Millionaires is $25K and the organization itself is a tax-exempt nonprofit venture.

Unlike what is proposed here, H.R.5336 includes a large number of exceptions, exclusions, extensions, and limitations that introduce significant complexity. The H.R.5336 restrictions on capital gains eligibility would negatively impact society’s middle class. Furthermore, it is unclear how and why the Patriotic Millionaire policies would be applied and regulated given the bill’s confusing array of references to businesses and family farms.

The Patriotic Millionaires bill requires a major overhaul because its reform scope overlooks basic taxation policy problems that contribute to severe wealth inequality. Despite having the allure of a grassroots movement, membership to Patriotic Millionaires is limited to very wealthy individuals, which limits dissenting perspectives. The proposed Patriotic Millionaires bill called H.R.5336 is published here: https://www.congress.gov/bill/119th-congress/house-bill/5336/text

The passage of any tax reform faces many challenges:

1. Members of the very wealthy class want to set the policies and when they cannot, they paint reforms as a partisan set of measures to sweep under the rug.
2. The US Constitution does not have a process to hold a national referendum on any issue. Therefore, any appeal to Congress must be loud and clear. It is frequently observed that the top leaders of both parties do not represent or follow through on the values and priorities of the majority of their members. Therefore, nothing changes until there is increased and sustained public discussion about specific measures to counter wealth inequality.
3. We currently see endless appeals to join political fights without a clear strategy. For example, calling for higher minimum wage may sound like a good idea to some, but it does not adequately address the impacts of our national debt, inflation, and the dynamic of wealth inequality. Calling for universal health care without a congressional led path is not a strategy for change. The brass tacks of the matter are that the brash taxation policies enriching the few and harming the many are being drowned out by the ubiquitous DONATE button.
4. The very wealthy class adores Libertarians because they share a common goal to make government more “efficient”. The work is then carried out by the very wealthy who see public programs like affordable health care, education, and emergency services as items to cut in favor of lowering taxes. Consequently, these cuts plunge the country deeper into debt because, unlike Libertarians, the very wealthy do not prioritize national debt repayment. Addressing the trend of our “K shaped economy” requires fiscal responsibility and part of that involves taxation.
5. While recognizing that efficiency is important, it is vitally important to recognize that the performance of our economy and performance in general is the combination of being both efficient and effective. To be effective, tax revenue is important and that means addressing the fact that the 0.1% of Americans who own more wealth than over 66% of all Americans are disproportionately benefiting from the federal tax code and that wealth divide is skyrocketing.

There is no doubt that the greatest resistance to equitable tax reform will come from very wealthy individuals and some loyal subordinates. The very wealthy can afford to launch campaigns to oppose tax and policy reforms. The very wealthy are often successful with fomenting fear that taxation is a threat to our free-market system. Without the clarity of thought that wealth inequality underpins our society's social issues, the issue of wealth inequality is silenced.