A year ago, the prospects for vast improvements to tax policy seemed right around the corner. The American Rescue Plan expanded the Child Tax Credit (CTC) and the Earned Income Tax Credit, using the tax code to directly reduce inequality and help families weather an incredibly volatile economy. That law also provided expansive funding for health, local government, and communities, signaling a shift in the way we as a country were thinking about government’s role in solving problems.
The rescue plan didn’t contain revenue provisions because at that moment we needed to save a flailing economy and help people survive a health and employment crisis. But its spending and tax credits slashed poverty, rescued the economy, and took on our health crisis.
With the economic emergency under control, President Biden is proposing tax increases on the uber-rich and corporations to fund ongoing health, education and infrastructure needs. It is the logical next step. Yet a deeply divided Senate has not ratified those, despite the enormous popularity and urgent imperative for these policies.
It is time to jump-start the stalled tax reforms. We solved unprecedented and unexpected crises in 2021. Long-term troubles for this country and this planet now demand our attention. Progressive tax policy would transform our ability to tackle them.
Inequality has skyrocketed while the very rich still escape taxation on almost all of their income. Billionaires saw their wealth surge by $1.8 trillion during the pandemic. Policies to address this abound, from the multi-millionaire’s surcharge that passed the House last November, to the Billionaires Minimum Income Tax that President Biden proposed in late March, to the reform on inheriting multi-million-dollar assets tax-free, that was removed before the full House had a chance to vote on it. There’s a strong case for all of them, but it would be a tragedy to pass none of them.
Corporate profits are through the roof While tax loopholes still let profitable corporations avoid paying anything close to the rate we expect. ITEP’s research consistently finds that enormous profitable corporations pay far less than the statutory 21 percent tax rate, and that many pay nothing at all. One simple fix is the minimum corporate income tax that passed the House last year – it would make sure the biggest, most profitable corporations pay at least 15 percent of their profits in taxes.
Poverty is rising again. We know what works. We can and should use the tax code to assertively relieve poverty. For the lowest-income 20 percent of families with kids, cash and tax provisions in the American Rescue Plan, boosted household incomes by one third, enough to alter life trajectories and dramatically increase stability. The CTC changes made major strides in addressing historic inequities that had left out many Black, Hispanic and Indigenous children. Extending these expansions would reduce poverty and inequality in ways that would have lifelong benefits for the next generation of Americans.
Other growing problems need publicly funded solutions. If we raise all this revenue – by taxing billionaires, taxing corporations, and closing loopholes – we will have the funds we need to take on other enormous challenges that loom over us.
The planet needs the resources tax reform would generate. In March, not typically fire or storm season, we saw catastrophic tornadoes in Louisiana and fires in Colorado. Oil-rich Russia’s invasion of Ukraine reminds us that relying on fossil fuels also threatens international security. Public funds could green our economy in ways that do much to curb the terrifying escalation of climate catastrophes.
Our health also demands public spending. New COVID variants reinforce the need to refine and deliver vaccines for those who want them, and to expand health insurance coverage, which remains inadequate in the United States.
On education, both pre-K and college are unaffordable for many American families and the revenue from taxing the uber-rich and corporations could make both into something our young people could count on.
In short, climate justice, racial justice, and economic justice all remain elusive, in part because we’ve been unwilling to marshal the ample resources of this incredibly wealthy country and use them to solve the problems that threaten our very existence. Good tax policy is how we use that wealth to create the nation we were meant to have.