A troubling question arises: "Are billionaires and corporate goliaths paying their fair share in taxes?" Most teachers and retail workers might be astounded to realize that billionaires in the U.S. pay a lower tax rate. The tax code favors income from wealth over work, enabling the richest to pay a smaller portion of their income to the federal government than most working families.
Consider this revelation: U.S. billionaires grew 46 percent, or $1.6 trillion, richer in 2020. Meanwhile, a White House study from 2021 revealed that the top 400 billionaire families in the U.S. paid a measly average federal individual tax rate of just 8.2 percent. For context, the Average Joe paid 13 percent in the same year.
More astonishing are the figures that emerged from a ProPublica investigation. Analyzing leaked tax returns showed that the 25 wealthiest Americans paid only $13.6 billion in taxes from 2014-2018. That accounts for a dismal "true" tax rate of just 3.4 percent on their income of $401 billion.
Tax Reformation: What's the Need of the Hour?
To fix the yawning gap in tax distribution, IRS codes should sanction higher individual tax rates for billionaires to level taxes on capital gains and labor income. In essence, work mustn't be taxed more than wealth.
It's not just enough to tax their income. Billionaires should also pay a wealth tax. The law should plug tax loopholes that allow the rich to hide profits in tax havens. As Pope Francis said, "In reality, taxation is a symbol of legality and justice."
Corporations and Tax: Do They Balance Out?
While extravagant profits have fallen into the laps of giant companies in recent years, they often pay lower tax rates than most working families. This inequitable distribution is mainly because many capitalize on generous tax breaks and stash profits in tax havens worldwide.
According to the Institute on Taxation and Economic Policy, 55 of the giant corporations in the USA paid no federal corporate income taxes in 2020.
The imbalance grows even larger when considering that the U.S. government allegedly lost $135 billion in revenue in 2017 due to corporate tax avoidance. On the contrary, annual corporate philanthropy was less than $20 billion.
Adding to the tax evasion fiasco, corporations allegedly funneled nearly $1 trillion in global profits to tax havens in 2022. This move stripped countries globally of much-needed tax revenue for their utilities and growth.
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Corporate Responsibility: Where Does It Lie?
Corporations must go beyond maximizing profits for their predominantly wealthy, white shareholders. They should extend their support to the employees, consumers, and community members they rely on to make money.
What's the panacea? To curb tax haven abuse and the offshoring of corporate profits, corporations should maintain the same tax rate on their foreign earnings as on their domestic profits. In addition, all large multinational corporations must pay a global minimum tax rate.
Corporations should disclose critical financial data to illuminate the obscurity that conceals corporate tax evasion. Figures like revenue, profits, and taxes paid must be reported country-by-country.
The Payback of Taxing the Affluent
Taxing the rich could prove to be an advantageous transaction. Projections by Oxfam determine that an escalating wealth tax on U.S. multimillionaires and billionaires could bring in an astounding $664 billion every year. These funds could be instrumental in pulling people out of poverty.
Such revenue would empower the U.S. to fund initiatives that safeguard the environment. Inspired by the 2022 Inflation Reduction Act, tax credits could be implemented for consumers and companies to reduce carbon emissions. This could successively support the creation of a new Civilian Conservation Corps- a jobs program directed to combat the climate crisis actively.
Simultaneously, it would also push policies that alleviate child poverty. Reconstituting the child tax credit could save more children from poverty. As records show, the credit reached over 60 million children in 2021, slashing child poverty by 30 percent. This also provides a poignant opportunity to fund child health waivers used by 90 percent of U.S. schools to fight childhood hunger, ensuring lunch availability for hungry children.
As Gina Cummings, Oxfam America's Vice-President of Advocacy, Alliances, and Policy, appropriately reminds us, "It's time for our country's billionaires and megacorporations to pay their fair share of taxes to help the individual who has provided the labor that has allowed them to enjoy record profits and excess wealth."
