For Republicans, the idea that the tax code should give preferential treatment to investment has been sacrosanct, ostensibly to promote economic growth and innovation that could benefit everyone. But the news this week showed how the treatment of stocks, bonds, real estate and huge loans taken off those assets has sent the tax bills of the richest Americans plummeting.
“My intention as the author of the 2017 tax reform was not that multibillionaires ought to pay no taxes,” said Senator Patrick Toomey, R-Pa., who helped write the law that slashed taxes by more than $1 trillion. “I believe dividends and capital gains should be taxed at a lower rate, but certainly not zero.”
Democrats, especially in the Senate, have been hard at work on a tax package to finance President Joe Biden’s costly domestic agenda, including a major infrastructure plan, climate change measures and the expansion of education and health care benefits. Much of that work — vehemently opposed by Republicans — has been focused on clawing back tax cuts lavished on corporations by the 2017 tax law, President Donald Trump’s signature legislative achievement, and to prevent multinational corporations from shifting taxable profits offshore.
The United States taxes people based on their income and investment gains, not according to their net worth. But ProPublica calculated that after all the accounting work, the 25 richest Americans paid what it called a “true tax rate” — the proportion of their total wealth paid in taxes — of only 3.4%.
“Americans knew that billionaires played these kinds of games,” Sen. Ron Wyden of Oregon, the chairman of the tax-writing Finance Committee, said on Wednesday. “What was significant yesterday was it was all laid out in stark detail about the most affluent people in America.”
He said he was working on an array of proposals to get at the issue, possibly including a return to some kind of minimum tax, and would soon unveil specific proposals.
“Billionaires are going to have to pay their fair share, every year,” he said.