ProPublica’s analysis of recently-revealed tax documents from the ultra-rich reveals that they pay almost nothing in taxes – completely legally – because the U.S. tax code primarily targets reported income rather than total wealth. Because the vast majority of the top earners’ fortunes are stored in stocks and other assets, their income tax ends up being tiny fraction of what they’re worth.
The average worker does not have this luxury.
Unfortunately, rather than rebalance the tax system in the average citizen’s favor, the North Carolina Senate’s proposed budget would make inequality worse. Senate Bill 105 would eliminate the corporate income tax (CIT) and lower the already flattened personal income tax (PIT), which is exactly the opposite of what needs to be done.
This inequality is not the result of an oft-exploited loophole – it is built directly into the tax code. From the beginning, rich interests lobbied hard to keep their wealth from being taxed in the same way as earned income, allowing them to shift much of the tax burden onto everyday workers.
Today, the U.S.’s definition of earned income only includes the value of stocks, property, and other assets if the owner decides to sell and collect a paycheck for them. If not, those assets are ignored. In the United States, the vast majority of wealth owned by the top 1 percent is in the form of these so-called unrealized gains, with only a small percentage of their net worth in the form of a reportable income. CEOs like Jeff Bezos, for example, have yearly wages set as low as $80,000, yet are worth billions of dollars.
The majority of Americans, however, do not hold treasure troves of untaxed wealth in the same way. Many people live paycheck to paycheck, their wages going straight to paying for necessities, not to buying up real estate. Additionally, most Americans do not own extensive stock portfolios that exist to buoy their personal wealth while shrinking their tax burden. In fact, the bottom 50 percent of the wealth index own less than 1 percent of all corporate equity and mutual fund shares in the United States.
Now some leaders in the General Assembly want to let billionaires amass even more wealth. Read more