New report reveals millionaires’ tax rates slashed by half since 1950s, fueling wealth inequality

This stark reduction in tax rates for the wealthiest Americans coincides with an era of escalating income disparity and could be costing the federal government hundreds of billions in lost revenue annually.

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A new report by Americans for Tax Fairness (ATF) has uncovered that millionaires in the United States now face an effective tax rate that is approximately half of what their predecessors paid in the mid-20th century. This stark reduction in tax rates for the wealthiest Americans coincides with an era of escalating income disparity and could be costing the federal government hundreds of billions in lost revenue annually.

The ATF analysis shows that between 1945 and 1980, Americans with incomes of $1 million or more were subjected to effective tax rates ranging from 40 to 60 percent, with an average rate of 50.1 percent. Fast forward to 2021, and this figure has plummeted to an average of 26.2 percent. Even more striking is that households earning over $10 million annually now pay an average tax rate of just 25.1 percent.

The implications of these reduced tax rates are vast. ATF’s report estimates that if millionaires were taxed at mid-20th century rates, the federal government would have collected an additional $370 billion in revenue in 2021 alone. This loss in potential tax revenue underscores a significant shortfall in funding that could otherwise be allocated to critical public services and infrastructure.

The shift toward lower tax rates for the wealthy began in earnest during the 1980s under the Reagan administration, which championed a series of neoliberal tax reforms favoring the rich and corporations. This trend continued with subsequent tax cuts under Presidents George W. Bush and Donald Trump. While corporate tax rates also saw a dramatic decrease, individual tax obligations for the highest earners dropped from around 50 percent in the early 1980s to hovering around 25 percent thereafter.

The disparities exacerbated by the 2017 Trump tax cuts have put wealth inequality under a microscope. ATF points out that billionaires in the U.S. have seen their wealth double since these cuts were implemented, now holding a staggering $5.8 trillion. This concentration of wealth is at a record high, representing about 4 percent of all American wealth.

President Biden and Congressional Democrats have proposed countermeasures aimed at reversing these trends. Their plans include raising taxes on large corporations and the wealthiest individuals, closing loopholes that benefit those offshoring profits, and implementing a minimum tax on multimillion-dollar incomes. However, these proposals face stiff opposition in a deeply divided Congress.

Public sentiment strongly supports reforming the tax system to ensure fairness. Polls conducted by Navigator Research show a clear majority of Americans believe that the ultra-wealthy and major corporations are not paying their fair share of taxes. Advocacy groups like ATF are leveraging this public opinion to push for substantial changes that would make the tax code more equitable.

Economic historians and policy experts agree that tax policy is a powerful tool for managing economic inequality. The mid-20th century, a period marked by higher tax rates for the rich, saw more robust economic growth and a narrower income gap. This historical perspective suggests that revisiting some of these past policies could help address current disparities.

David Kass, Executive Director of Americans for Tax Fairness, argues that today’s tax code is “rigged against ordinary people.” According to Kass, “The plummeting tax rate on million-dollar incomes shows how the tax code has become skewed in favor of the wealthy and corporations and against the interests of working families.”

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Alexandra Jacobo is a dedicated progressive writer, activist, and mother with a deep-rooted passion for social justice and political engagement. Her journey into political activism began in 2011 at Zuccotti Park, where she supported the Occupy movement by distributing blankets to occupiers, marking the start of her earnest commitment to progressive causes. Driven by a desire to educate and inspire, Alexandra focuses her writing on a range of progressive issues, aiming to foster positive change both domestically and internationally. Her work is characterized by a strong commitment to community empowerment and a belief in the power of informed public action. As a mother, Alexandra brings a unique and personal perspective to her activism, understanding the importance of shaping a better world for future generations. Her writing not only highlights the challenges we face but also champions the potential for collective action to create a more equitable and sustainable world.

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