With this being tax season and with inflation running amok, finances are top of mind for Americans.
Well, finances and Easter and the opening of baseball season and the Oscars slap heard ’round the world. We are, after all, multifaceted people capable of several thoughts simultaneously.
But when it comes to taxes and the economy, there is no shortage of concern. Let’s start with taxes, considering that 2021 filings are due Monday.
That makes the latest report from ProPublica particularly timely. Expanding on a report from last year, the nonprofit investigative news outlet tells us what we already knew — really wealthy people don’t pay much in taxes. Well, they pay a lot, but as a percentage of what they have, it doesn’t seem like much.
Between 2014 and 2018, according to the report, the 25 wealthiest Americans collectively earned $401 billion and paid $13.6 billion in taxes. That works out to 3.4 percent of their earnings, which is a lower percentage than a lot of Americans pay.
We’ll save you the math: The people in question made, on average, $3.2 billion per year. And keep in mind, most of that period was before the Trump tax cuts that benefited the wealthy, further lowering their tax burden.
For some, this will be cause for outrage. But the percentage is not lower than that paid by most Americans. The nonpartisan Tax Policy Center estimates that 57 percent of households paid no federal income tax in 2021 — an increase from 44 percent prior to the COVID-19 pandemic. Experts say COVID-related job losses and income declines, stimulus checks and tax credits were mostly responsible for the increase in the percentage of nonpaying households.
Last year, ProPublica reported that many super-wealthy people also pay nothing in federal income tax. Jeff Bezos — who as of Thursday had a net worth of $177.5 billion, according to Forbes — paid no income taxes in 2007 and 2011 and paid a relative pittance in other years.
As we have pointed out in the past, this is not a condemnation of the wealthy. They don’t make the rules; they simply make good use of them.
They take advantage of a system that allows them to draw a salary of, say, $1 a year while accumulating wealth in stocks or other items that are taxed at a lower rate than income. And they take advantage of a system that allows them to take out loans against their wealth and declare a negative net income for the year.
We would do the same if we had $177 billion and really smart tax lawyers.
Instead, most of us are simply worried about inflation. In its report on the Consumer Price Index for March, the U.S. Department of Labor reported that prices had risen 8.5 percent in the past year.
If you drive a gas-powered vehicle, you have noticed that increase, and a rise in gas prices gets baked into everything we buy. Supply-chain issues and labor shortages also have contributed to rising prices, leading to the highest inflation rate since Reagan was president.
Which is kind of the point about inflation. Reagan was, inarguably, cleaning up a mess left behind by his predecessor, Jimmy Carter; you know, much like President Joe Biden is doing in the wake of his predecessor.
In fact, the past three Republican presidents have left office either in the middle of a recession or shortly after the official end of one. George H.W. Bush, George W. Bush, and Donald Trump oversaw recessions late in their presidencies, while neither Bill Clinton nor Barack Obama weathered a recession during their time in office (other than the one Obama inherited).
As the old saying goes, once is chance, twice is a coincidence, three times is a pattern.
It is doubtful that voters will recognize that pattern. Republicans inexplicably retain a counterfeit status as the party of fiscal responsibility, and their elected officials are making hay out of the current inflation rather than trying to reduce it.
All of which provides some fodder for this season of contemplating financial policy.
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