Thread by @jacsamoby

More on our new paper: This graphic shows how a wealthy person can avoid income tax on a huge % of her income. cbpp.org/research/feder…

But there are solutions!

Starting w/ways to tax more types of income: policymakers should repeal stepped-up basis & tax capital gains of affluent households when assets are transferred to heirs. We can do this w/o affecting the middle-class (Obama’s budget did this, for one).

We should also shore up the estate tax, which has been severely weakened. Policymakers could reimpose the tax’s 2009 parameters ($3.5M/$7M exemption & 45% top rate) & close various estate tax loopholes.

Or, replace the estate tax w/an inheritance tax.
equitablegrowth.org/silver-spoon-t…

Policymakers could also impose a mark-to-market (MTM) system for wealthy households, which would impose tax annually on assets’ gain in value, whether or not they’ve been sold. Senator Ron Wyden recently released a white paper calling for such a system.
finance.senate.gov/imo/media/doc/…

As an alternative to MTM, policymakers could impose a wealth tax on wealthy households’ overall wealth holdings, w/o regard to actual gains & losses. Senator Warren’s 2 percent tax on households w/>$50M in net assets (3% for billionaires) falls in this bucket.

For ways to improve the taxation of income already taxed: raise the top rate (now 37%, far below the post-WWII ave. of 59%). And/or, enact a surtax on very high AGIs, which would help prevent wealthy filers from avoiding the top rate (b/c of deductions, capital gains, etc).

One of the simplest ways to ensure that the tax code doesn’t reward wealth over work would be raising rates on capital gains & dividends (currently 23.8%) to match or get closer to prevailing rates on wages & salaries.

Any progressive tax plan should repeal the 20% pass-through deduction added in the 2017 tax law.

The deduction mostly benefits high-income households & promotes tax avoidance by encouraging them to convert labor income into pass-through income.
cbpp.org/research/feder…

Policymakers should also raise the corporate tax rate, which the 2017 tax law slashed from 35% to 21%. Raising the rate to 28% or somewhat higher, plus broadening the corporate tax base, would reduce wealth inequality and raise revenue.

Any effort to boost progressive revenues should increase IRS funding for enforcement & operations support. The IRS plays an essential role in gov’t, collecting nearly all the revenue that funds important federal programs. Let it do its job.
cbpp.org/blog/high-cost…

These options don’t constitute a single agenda (some are complementary & others are alternatives), & they aren’t exhaustive. As w/all policies, they have advantages & tradeoffs. But the system isn’t working, and these policies all deserve good faith consideration.
#TaxFairness