The Platform


Eight out of every ten Americans support higher taxes on the wealthiest Americans and businesses to address the glaring issue of wealth inequality. The U.S. Congress has notoriously had issues passing legislation raising taxes on the richest Americans. In late July, President Biden’s campaign pledge to raise taxes on wealthy Americans and corporations was given new life. West Virginia Senator Joe Manchin, to the surprise of many, announced that he had come to an agreement with Chuck Schumer, the Senate Majority Leader, to support a bill that would raise taxes on the wealthiest Americans. The bill also tackles the climate crisis and healthcare.

A majority of liberals and progressives believe American companies, whose tax revenues toward roads and schools have gradually decreased since the 1940s, should pay “their fair share” by reversing deregulation, and tax cuts that began under Ronald Reagan in the 1980s. During Donald Trump’s presidency, in 2017, the corporate tax rate was lowered from 35% to 25%. Today, many companies pay less or even no federal taxes.

In the 1990s, under Bill Clinton, the Democratic Party embraced tax cuts on investments, deregulations of Wall Street, and overall more amicable corporate relationships. The Democratic Party’s rightward lean had been done for pragmatic reasons because the U.S. government was thriving under a market-oriented economy that promoted corporate growth and capitalism. The turn towards laissez-faire economics with declines in tax rates on the rich may have primarily led to economic inequality and stagnation. Because of this, Americans today generally strongly favor the liberal notion to raise taxes on the wealthy.

The current proposal to tax the wealthy includes $430 billion for energy, electric vehicle tax credits, the climate crisis, and health insurance investments, paid for by raising corporate taxes and enforcing existing tax laws. Specifically, the bill would create a 15% minimum tax on American companies generating profits of over $1 billion, which would raise $313 billion within a decade. Another goal of the proposed bill, which will require all 50 Democrats in the Senate to back it, is also to close the “carried interest loophole,” which is a tax break for Wall Street that allows many financiers to pay a lower capital gains tax rate, which would generate $14 billion in future income.

Biden commented during a speech on July 28 that the deal is “the most important investment that we’ve ever made in our energy security,” and that it would “lower the healthcare cost for millions of Americans.” Further, he commented that the compromise bill would “for the first time in a long time begin to restore fairness to the tax code- begin to restore fairness by making the largest corporations in America pay their fair share without any new taxes on people making under $400,000 a year.” However, is attempting to tackle the problem of wealth inequality in the United States with seemingly more inequality a justified and constitutional method of generating revenue for government services and redistributing national wealth?

In analyzing this pertinent issue, consider Europe. All but three countries in Europe have repealed their wealth taxes after deeming them policy failures including France which ultimately canceled its failed version of taxing the wealthy in 2018 after facing “brain drain, capital flight, and revenue losses.”

Indeed, Greg Rosalsky’s NPR article, “If a Wealth Tax is Such a Good Idea, Why Did Europe Kill Theirs?” reveals and summarizes this point succinctly. Generally, progressive liberals tend to use Europe as a model for policy successes; however, this time, liberals are choosing to ignore the experiment with the wealth tax in Europe. The previously mentioned wealth tax in France contributed to an “exodus” of 42,000 millionaires between 2000 and 2012. Today, only Norway, Spain, and Switzerland stand in Europe with a wealth tax, while in 1990, twelve countries in Europe had one.

This is due to economic trends that became painfully obvious through this experiment: its administration was costly, it hurt individuals with large amounts of assets rather than hard cash, it dramatically affected investment decisions, drove the wealthy (and their money) to other nations, and ultimately, did not raise as much revenue as expected.

Furthermore, unfair taxes on wealthy Americans are intended to redistribute wealth and force the upper classes to contribute “their fair share,” but is it fair and lawful to create a selective tax? Indeed, there has been a recent debate about whether or not the federal government has the ability to create this form of taxation based on the U.S. Constitution. In fact, in 1913, the first income tax required a constitutional amendment. The current debate, similarly, impugns whether a tax on the wealthy would be considered a “direct tax,” which creates extreme limitations on the federal government according to the fourth clause of Article I, Section 9 known as the “Direct Tax Clause,” which states that “No Capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or Enumeration herein before directed to be taken.”

Thus, considering all these factors, wealth inequality is a grave problem that needs to be addressed using creative legislation from the federal government. Further, the idea of simultaneously attempting to reduce soaring wealth gaps in our nation while improving other sectors through the generation of billions of dollars from the proposed new taxes is extremely appealing as well. However, creating essentially a form of a direct tax on individuals and corporations which have capitalized on the “American Dream” is unjust both in the representation of opportunity in America and our founding document.

Furthermore, the approach of taxing the wealthy has already been experimented on within a dozen European nations and proven unsuccessful in redistributing wealth and generating revenue for government programs, which has hardly been recognized by liberals and progressives in the public push for the national restructuring of our tax system. Thus, in the light of recent action from the Biden administration, it may be best to reconsider the glaring repercussions that may lay ahead if we choose to enact the Manchin-led bill and use inequity to battle inequality.

Mia Kim brings her unbounded passion for global issues as well as her communication, organization, and cooperative skills to FPYC as a content producer and editor. Before joining FPYC, Mia worked to placate the imperative issue of 'period poverty' in her community by donating a grant of 45,000 sanitary pads to local shelters in her passion to help our world’s future women, and she has also gained an interest in foreign and domestic policy through the Model United Nations club offered at her school.