Left Voice - March 22, 2021

The U.S. personal income tax system is what economists call a “progressive” one — meaning that the tax rate increases with the amount of taxable income. The idea is to take the tax burden off of lower-income people and shift it to those with a higher ability to pay. To make the concept even clearer, consider its opposite, the “regressive” tax: A sales tax is the same for everyone, so by definition those with lower income pay a higher percentage of that income in tax when they purchase, say, even just a box of tissues.

The bottom line with income tax: the more money you make, the more taxes you pay — right? Not necessarily.

Sure, the wealthiest in the United States are subject to a top rate of 37 percent on their taxable income (a reduction from 39.6 percent thanks to Trump). But this is capitalism, and the golden rule is that whoever has the gold makes the rules. Our system is riddled with ways for the ultra-wealthy to “protect their assets,” effectively decreasing the amount of income on which tax can be levied.

The ultra-wealthy — or more accurately, their accountants, and they can afford to hire the best ones — use all sorts of tricks. They hide their money in tax havens — places like the Cayman Islands, where taxes are very, very low. They create shell companies that exist only on paper, and channel their money into them. There are equity swaps: two rich guys exchange the gain and loss of a set of assets without actually transferring ownership. They create shell trust funds. The list goes on and on — and every one of these tricks, allowed within the letter of the law, is a form of tax evasion.

No one in the working class has the ability to take advantage of any of these tax-avoidance gifts to the ruling rich. The wealthy hold on to their money while the rest of us fund everything from trash collection to U.S. imperialist forays into other countries. The number one way they do this is by having a tax system that distinguishes between labor income (wages, salaries, and employer-provided benefits) and capital income (dividends, interest, rental income, capital gains, and so on). The former flows from doing actual work; the latter flows from ownership of assets. The U.S. tax code is page after page of helping the wealthy keep their capital income. Meanwhile, if workers fail to pay their income tax, the government will just take it directly from their paychecks. ...
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