From the authors of the big book of the year, Emmanuel Saez and Gabriel Zucman,
For the first time in the past hundred years, the working class — the 50 percent of Americans with the lowest incomes — today pays higher tax rates than billionaires... The richest 400 adults pay a lower tax rate than all other groups... Taking into account all taxes paid, each group contributes between 25 percent and 30 percent of its income to the community’s needs. The only exception is the billionaires, who pay a tax rate of 23 percent, less than every other group.
They disaggregate among different income categories the 28% of national paid out in federal, state and local government taxes in 2018 and get the graphic below.
The state and local taxes, which form a third of all tax revenues, are, as can be seen, extremely regressive. And how have we reached this state of affairs?
There is nothing inherent in modern technology or globalization that destroys our ability to institute a highly progressive tax system. The choice is ours. We can countenance a sprawling industry that helps the affluent dodge taxation, or we can choose to regulate it. We can let multinationals pick the country where they declare their profits, or we can pick for them. We can tolerate financial opacity and the countless possibilities for tax evasion that come with it, or we can choose to measure, record and tax wealth. If we believe most commentators, tax avoidance is a law of nature... But they are mistaken. Tax avoidance, international tax competition and the race to the bottom that rage today are not laws of nature. They are policy choices, decisions we’ve collectively made — perhaps not consciously or explicitly, certainly not choices that were debated transparently and democratically — but choices nonetheless. And other, better choices are possible.
Take big corporations. Some countries may have an interest in applying low tax rates, but that’s not an obstacle to making multinationals (and their shareholders) pay a lot. How? By collecting the taxes that tax havens choose not to levy. For example, imagine that the corporate tax rate in the United States was increased to 35 percent and that Apple found a way to book billions in profits in Ireland, taxed at 1 percent. The United States could simply decide to collect the missing 34 percent. Apple, like most Fortune 500 companies, does in fact have a big tax deficit: It pays much less in taxes globally than what it would pay if its profits were taxed at 35 percent in each country where it operates. For companies headquartered in the United States, the Internal Revenue Service should collect 100 percent of this tax deficit immediately, taking up the role of tax collector of last resort. The permission of tax havens is not required. All it would take is adding a paragraph in the United States tax code. The same logic can be applied to companies headquartered abroad that sell products in America. The only difference is that the United States would collect not all but only a fraction of their tax deficit. For example, if the Swiss food giant Nestlé has a tax deficit of $1 billion and makes 20 percent of its global sales in the United States, the I.R.S. could collect 20 percent of its tax deficit, in addition to any tax owed in the United States. The information necessary to collect this remedial tax already exists: Thanks to recent advances in international cooperation, the I.R.S. knows where Nestlé books its profits, how much tax it pays in each country and where it makes its sales.
As Saez and Zucman point out, it is for America to bite the bullet and initiate this proposal and let others follow suit. Are the liberals listening?
See also this by David Leonhardt,
The overall tax rate on the richest 1 percent would roughly double, to about 60 percent. The tax increases would bring in about $750 billion a year, or 4 percent of G.D.P., enough to pay for universal pre-K, an infrastructure program, medical research, clean energy and more. Those are the kinds of policies that do lift economic growth. One crucial part of the agenda is a minimum global corporate taxof at least 25 percent. A company would have to pay the tax on its profits in the United States even if it set up headquarters in Ireland or Bermuda. Saez and Zucman also favor a wealth tax; Elizabeth Warren’s version is based on their work.Also, I am sure in the days ahead, the venerable economists will indulge in hair-splitting over arcane and marginal concerns, and seek to detract from the central message about sharply reduced tax progressivity and its contribution to widening inequality, which, as Paul Krugman says here, screams out loud!
Btw, in terms of economists who are engaged with important real-world issues in a meaningful manner, are there any others more important than Thomas Piketty, Emmanuel Saez and Gabriel Zucman? I am inclined to believe that in 20 years hence, these three will be hailed as being among the most influential economists of our times in terms of having deeply influenced the trajectory of economic policy making. Interestingly, none are American and all three are Frenchmen.