Tax Reform for the bottom 90%
Tax the Rich. Close the Loopholes. Save the Middle Class.
Introduction: A System Built for the Few
America’s tax code has been steadily hollowed out to favor the ultra-wealthy and giant corporations. Today, ordinary workers see more taken out of each paycheck, while billionaires hide behind loopholes and tax shelters. In 2021, 55 of the nation’s largest corporations paid zero dollars in federal income taxes, despite reporting over $40 billion in combined profits. Meanwhile, a teacher or nurse pays steadily into the system with every paycheck. This disparity isn’t accidental—it’s the result of deliberate policy choices that have tilted the playing field.
Historical Context: From Shared Sacrifice to Elite Privilege
In the post-World War II era, America embraced a vision of shared sacrifice. The top marginal income tax rate hovered above 90%, and corporations shouldered over 30% of federal revenue. These funds built the interstate highway system, funded the GI Bill, and fueled decades of broad-based prosperity.
Starting in the 1980s, however, the “Reagan Revolution” ushered in a new orthodoxy: low taxes for the wealthy, deregulation, and a belief that “trickle-down” would lift all boats. The Tax Reform Act of 1986 slashed the top rate from 50% to 28% and carved out special breaks for capital gains. Subsequent legislation under both parties continued this trend—most notably the Tax Cuts and Jobs Act of 2017, which cut the corporate rate from 35% to 21%. As a result:
Corporate tax contributions fell from 32% of federal revenue in 1950 to under 7% today.
The top marginal rate on ordinary income has dropped from a post-war high of 91% to 37%.
These changes hollowed out the middle class’s share of national income and shifted more of the tax burden onto wage earners.
Current Impact: The Middle Class Is Drowning
The effects of these policies are clear:
Wealth Concentration: The top 1% now owns 40% of the nation’s wealth, while the bottom 90% hold just 23%.
Stagnant Wages: Since 1979, worker productivity has risen 62%, yet median hourly pay has grown only 17.5%.
Homeownership Decline: Americans under 35 own homes at a rate 20% lower than in 1980, even as housing costs have more than doubled (in real terms).
Soaring Student Debt: Student loan balances top $1.7 trillion, while tuition increases have outpaced wage growth by a factor of four over the past two decades.
As corporate profits soar to record highs, average families struggle to keep up with rising costs in housing, education, and healthcare.
Core Problems: Capital Gains, Corporate Evasion, and Wealth Shelters
Preferential Capital Gains
Investment income is taxed at a top rate of 20%, compared to 37% for wages. This benefits the wealthy, whose income derives largely from stocks and real estate.
“Buy-Borrow-Die” Loophole
Billionaires avoid capital gains taxes by borrowing against their appreciated assets instead of selling them. Upon death, their heirs inherit these assets at a “stepped-up basis,” wiping out any unrealized gains—and the tax obligation—altogether.
Profit Shifting to Tax Havens
Large multinationals shift profits to low- or no-tax jurisdictions (e.g., Ireland, Bermuda), costing the Treasury over $100 billion annually. In 2020, Amazon’s global effective tax rate was just 1.2% despite $21 billion in profits.
Zero-Tax Corporations
According to Citizens for Tax Justice, many Fortune 500 firms routinely pay zero or negative federal income taxes through deductions, credits, and offshore loopholes.
These mechanisms starve the federal budget of revenue, forcing deeper cuts or higher levies on workers and small businesses.
What’s Working Abroad: Progressive Taxation Without Collapse
European democracies demonstrate that higher taxes on the rich can coexist with vibrant economies:
Sweden: Top marginal rates above 57%, robust social safety net, and higher GDP per capita than the U.S.
Norway: Wealth tax of up to 1.1% on net assets, funded by oil revenues; Gini coefficient (inequality measure) of 0.27 versus 0.48 for the U.S.
Germany: Combined corporate and solidarity tax rate around 30%, universal healthcare, and free tertiary education.
These nations invest tax revenues in education, healthcare, and infrastructure—fuelling human capital and long-term growth.
Proposed Reforms: The Time for Half-Measures Is Over
Implement a Wealth Tax
2% annual tax on net assets over $50 million, 3% over $1 billion. Economists Emmanuel Saez and Gabriel Zucman estimate this would raise over $3 trillion in a decade.
Enact a Minimum Corporate Tax
A 15% global minimum tax, aligned with the OECD’s agreement, to deter profit-shifting and raise an estimated $200 billion annually in the U.S.
Equalize Capital Gains and Income Tax Rates
Remove the preferential capital gains rate so that investment income is taxed at the same top rates as wages.
Close the Step-Up in Basis Loophole
Require unrealized gains to be taxed either at death or upon transfer—ending the ability to inherit untaxed fortunes.
Strengthen IRS Enforcement
Allocate $80 billion over ten years to hire personnel and modernize technology, narrowing the “tax gap” by at least $700 billion.
Anticipating Pushback: No, This Won’t Kill Growth
“Higher taxes stifle investment.” From 1945–1975, when top rates exceeded 70%, the U.S. saw its fastest GDP growth in history.
“Wealth taxes will drive billionaires overseas.” Canada and Norway have wealth taxes with minimal capital flight; these countries still attract global talent.
“Corporate taxes hurt workers.” Studies show that after tax increases in OECD countries, workers captured nearly 70% of any corporate tax cut in higher wages.
Conclusion: Build a Tax Code for a Just Economy
The current system is unsustainable. It entrenches inequality, undermines democracy, and erodes the American Dream. Reforming the tax code is not about punishing success—it is about restoring balance, funding essential services, and ensuring that those who benefit most from our society—billionaires and big corporations—contribute their fair share.
Let’s tax wealth fairly, close the loopholes, and rebalance our economy so that opportunity and security are available to all—not just the privileged few.