Making the Wealthy, Wall Street, and Large Corporations Pay their Fair Share

At a time of massive wealth and income inequality, we need a progressive tax system in this country that is based on the ability to pay. It is unacceptable that major corporations have paid nothing in federal income taxes, and that corporate CEOs in this country often enjoy an effective tax rate that is lower than their secretaries.

Real tax reform means Wall Street, the wealthy and large corporations pay their fair share.

Today, we lose over $100 billion a year in revenue because large corporations stash their cash in offshore tax havens around the world. That is unacceptable.

If we are serious about reforming the tax code and rebuilding the middle class, we have got to demand that the wealthiest Americans and largest corporations pay their fair share in taxes.

Sen. Sanders’ tax reform plan accomplishes that goal by closing loopholes that benefit the wealthy and well connected, making the tax code more progressive, and establishing a tax on Wall Street speculators whose greed, recklessness and illegal behavior nearly destroyed the economy seven years ago.

1. Reforming the Corporate Tax Code

In 2010, the effective tax rate of large, profitable corporations in the U.S. was only 12.6 percent, not the 35 percent nominal tax Republicans and corporate tax lobbyists complain about.

In 1953, the corporate income tax accounted for 32 percent of all federal revenue. Today, despite record-breaking profits, corporate income taxes only bring in 11 percent of total federal revenue.

Even worse, several large corporations in recent years have exploited so many loopholes in the tax code that they have paid nothing in federal income taxes and have actually received tax rebates from the IRS.

Overall, General Electric, Boeing and Verizon paid no federal income taxes during the combined 2008 through 2013 tax years. During that period, those three corporate giants racked up combined profits totaling more than $102 billion. In fact, they received income tax rebates from the Internal Revenue Service totaling more than $4.1 billion, according to a report from Citizens for Tax Justice.

One of the major reasons for this tax avoidance is that corporations have been setting up thousands of shell corporations in the Cayman Islands and other offshore tax havens to avoid paying taxes in the U.S.

A recent report by the Congressional Research Service shows that each and every year, large corporations are avoiding $100 billion in U.S. taxes by stashing their profits in offshore tax havens.

This situation has become so absurd that one five-story office building in the Cayman Islands is the “home” to more than 18,000 corporations.

Click here to read an op-ed from Sen. Sanders on corporate tax dodging.

In order to crack down on corporate tax avoiders, Sen. Sanders would:

2. Reforming the Estate Tax

The founders of our country declared their independence from what they viewed as a tyrannical aristocracy in England. More than two centuries later, today’s tyrannical aristocracy is no longer a foreign power. It’s an American billionaire class that has unprecedented economic and political influence over all of our lives.

Unless we reduce skyrocketing wealth and income inequality, the United States will be well on its way toward becoming an oligarchic form of society where almost all power rests with the billionaire class.

More than a century ago, President Theodore Roosevelt recognized the danger of massive wealth and income inequality and what it meant to the economic and political well-being of the country. In addition to busting up the big trusts of his time, he fought for the creation of a progressive estate tax to reduce the enormous concentration of wealth that existed during the Gilded Age.

“The absence of effective state, and, especially, national, restraint upon unfair money-getting has tended to create a small class of enormously wealthy and economically powerful men, whose chief object is to hold and increase their power,” the Republican president said. “The really big fortune, the swollen fortune, by the mere fact of its size acquires qualities which differentiate it in kind as well as in degree from what is passed by men of relatively small means. Therefore, I believe in … a graduated inheritance tax on big fortunes, properly safeguarded against evasion and increasing rapidly in amount with the size of the estate.”

Roosevelt spoke those words on Aug. 31, 1910. They are even more relevant today.

A progressive estate tax on multi-millionaires and billionaires is the fairest way to reduce wealth inequality and to help invest in a Medicare-for-all plan to guarantee health care as a right, not a privilege.

The estate tax now applies only to the wealthiest 0.2 percent of Americans, but Republicans have proposed to repeal it altogether. The Republican proposal would cost $269 billion over the coming decade and would help just 5,400 families next year. Nearly three-fourths of the benefits would go to those families inheriting estates worth more than $20 million.

Instead of repealing the estate tax, we must strengthen it by making the wealthiest Americans pay their fair share.

Sen. Sanders will fight for a progressive estate tax that will:

3. Tax Wall Street Speculators

One of the major reasons why the middle class is collapsing and the gap between the rich and everyone else is growing wider and wider is because of the greed, recklessness, and illegal behavior on Wall Street.

Millions of Americans lost their homes, life savings, and ability to pay for college because Wall Street gamblers crashed the economy in 2008.

During the financial crisis, the taxpayers of this country provided Wall Street with the largest bailout in the history of this world — $700 billion from the Treasury Department and $16 trillion in total financial assistance from the Federal Reserve.

While Wall Street has fully recovered from the recession and, in many cases has never had it so good, the typical middle class family is earning less income today than it did 26 years ago and students are drowning in debt. It is time for Wall Street to pay society back for the tremendous damage it did to the middle class of this country.

Senator Sanders will fight for the creation of a tax on Wall Street to significantly reduce speculation and high frequency trading which nearly destroyed the economy seven years ago.

Importantly, this initiative would also raise the revenue necessary to make public colleges and universities tuition free, create jobs, rebuild our crumbling infrastructure, protect our environment, and make other investments in our future.

This proposal would not tax investors, retirees, or parents saving to send their kids to college. Instead, it would impose a tax on Wall Street investment houses, hedge funds, and other speculators. If those Wall Street investment houses chose to pass the tax along to investors, this plan would provide a tax credit to individuals making under $50,000 and couples making under $75,000 to ensure that they would not be impacted.

Under this proposal, trades would be taxed at a rate of 0.5 percent for stocks, 0.1 percent for bonds, and 0.005 percent for derivatives. This means, for example, that a trade of $1,000 in stocks would be subject to a tax of $5. A trade of $1,000 in swaps or other derivatives would be subject to a tax of five cents.

Even at such low rates, this plan would provide a huge benefit by reducing one particular type of trading that does not benefit our economy: high-frequency trading that rewards technological schemes rather than investing in productive businesses.

For example, some traders have focused their energy on obtaining information about trades a fraction of a second before others, sometimes by locating their computers physically closer to where trades are happening. These computers then rush to buy or sell before others can respond, turning what would otherwise be a ripple in the market into a tidal wave that destabilizes the financial system.

There is considerable precedence for this. The U.S had a Wall Street speculation fee from 1914 to 1966. And, today some 40 countries throughout the world have imposed a financial transactions tax including Britain, Germany, France, Switzerland, China, India, South Korea, Hong Kong, Singapore, Taiwan, and Brazil.

More than 1,000 economists have endorsed a tax on financial speculation and 11 European countries have committed to enacting a financial transaction tax. This idea is also supported by more than 170 organizations in the U.S., including the AFL-CIO, National Nurses United, the National Organization for Women, NETWORK, Oxfam America, Public Citizen, the Sierra Club and many others.

4. Lift the cap on taxable income that goes into the Social Security Trust Fund

Right now, someone who earns $118,500 a year pays the same amount of money in Social Security taxes as a billionaire.  This makes no sense.

Sen. Sanders will fight to apply the Social Security payroll tax on all income above $250,000 to expand Social Security benefits and to ensure that Social Security remains solvent for the next 58 years. This plan would only impact the wealthiest 1.5 percent of wage earners; 98.5 percent of wage earners in the United States would not see their taxes go up by one dime under this plan.

5. Reforming the Personal Income Tax

Despite its complexity, our tax code fails in its basic task of raising enough revenue to finance adequate public investments. It also fails to raise revenue in a very progressive way. Citizens for Tax Justice estimates that in 2015, the richest one percent of Americans received more than 22 percent of the income in the U.S. and paid less than 24 percent of total taxes in the U.S. In other words, when all the federal, state and local taxes that Americans pay under current law are taken into account, our tax system is not progressive.

Senator Sanders’ personal income tax reform plan would make the wealthiest 2.1 percent of households in America pay their fair share by making three types of reforms. These changes would not affect any married couples with income below $250,000 or singles with incomes below $200,000.