The main cause of the radical drop in tax rates for very wealthy Americans over the past 75 years is not the one that many people would guess. It's not about lower income taxes (although they certainly play a role), and it's not about lower estate taxes (although they do matter).
The biggest tax break for the rich has been the sharp fall in the corporate tax rate
In the 1950s, 1960s, and 1970s, many companies paid about half of their profits to the federal government. The money helped pay for the US military and for investments in roads, bridges, schools, scientific research, and more. "A dirty little secret," said Richard Clarida, an economist now vice chairman of the Federal Reserve, once, "is that corporate taxation used to bring in quite a bit of revenue."
But since the mid-20th century, politicians from both political parties have supported corporate tax rate cuts, often under intense lobbying from corporate America. The cuts have been so big – including with President Donald Trump's tax reform in 2017 – that at least 55 large companies paid zero federal income taxes last year, according to the Institute on Taxation and Economic Policy. Among them: Archer-Daniels-Midland, Booz Allen Hamilton, FedEx, HP, Interpublic, Nike, and Xcel Energy.
"Right now, the US is collecting less corporate tax income as a share of economic output than almost all other advanced economies," Alan Rappeport and Jim Tankersley of The Times write.
The justification for the tax cuts has often been that the economy as a whole benefits – that lower corporate taxes would lead to business expansions, more jobs and higher incomes. But it didn't work out that way. Instead, economic growth has been mediocre since the 1970s. And incomes have grown even more slowly than the economy for every group except the wealthy.
The US economy does not appear to function as well when tax rates for the rich are low and inequality high.
Corporate taxes are capital taxes
Corporate taxes are such an important part of the total taxes paid by the wealthy as much of their assets are mostly stocks. And as business owners, they basically pay corporate tax. Most of their income does not come from a salary or bonus; it comes from the return on their wealth.
"In fact, the only significant burden on these billionaires is the corporate tax they pay through their firms," Gabriel Zucman, an economist and tax specialist at the University of California, Berkeley, told me. "The main reason the US tax system was so progressive before the 1980s is because of the high taxes on corporate profits."
President Biden is now trying to reverse some (but certainly not all) of the corporate tax decline. His plan would include raising the corporate tax rate, penalizing companies that move profits abroad, and introducing a rule designed to prevent companies from paying tax. The money would help fund his infrastructure plan. "It's fair, it's fair, it's fiscal and it pays for what we need," Biden said at the White House yesterday.
But some of the criticism is quite clearly inconsistent with the facts: The protracted drop in corporate tax doesn't seem to have brought much of a benefit to most American families.
For more: If you haven't listened to yesterday's episode of "The Daily" – where Jesse Drucker explains how Bristol Myers Squibb has dodged taxes – I recommend it.
THE LAST NEWS
Lived Lived: From the late 1950s onwards, Lois Kirschenbaum was a nighttime staple of New York opera, where her constant desire to get backstage helped her befriend some of the industry's biggest stars. She died at the age of 88.
ARTS AND IDEAS
What love looks like
"Love is a slick and elusive thing," writes novelist Celeste Ng in an essay for The Times.
It is captured in both striking and ordinary moments: parents drive an hour and a half to visit children and refill their refrigerator; a young couple riding a motorbike at night; a sleeping child surrounded by toy dinosaurs.
The photos are from Oregon, Hawaii, Georgia, Taiwan, Japan and beyond. There are glimpses of food, texts and emails from friends, loved ones falling asleep – the "little, everyday, everyday things that add up to what I've come to understand as love," as An Rong Xu, a photographer, writes.
PLAY, WATCH, EAT
What to cook
Registration sheet-pan jerk salmon cooks quickly. For more dinnertime inspiration, check out the 17 Best Recipes The NYT Cooking Team Created Last Month.
In the garden
Make friends with fungi, both the kind you plant and the ones that pop up on their own.
What to read
& # 39; First Person Singular & # 39;, Haruki Murakami's new story collection, brings the & # 39; own voice – or what sounds like his own voice, beautifully translated by Philip Gabriel – the stories within & # 39; writes David Means in a review.
Late at night
The late night hosts talked about rep Matt Gaetz.
Now time to play
Thank you for spending part of your morning at The Times. See you tomorrow. – David
P.S. New York City changed its name from Longacre Square to Times Square in honor of The New York Times' move to the area 117 years ago today. A Times story indiscreet – but correct – predicted that the new name & # 39; probably won't be forgotten & # 39 ;.
You can see today's printed front page here
Today's episode of "The Daily" is about Chauvin's trial. On & # 39; Sway & # 39; Diana Trujillo discusses the future of space travel.
Lalena Fisher, Ian Prasad Philbrick, Tom Wright-Piersanti and Sanam Yar contributed to The Morning. You can reach the team at [email protected]
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