The house of representatives passed what could be termed as the most significant tax overhaul in three decades. The tax bill which garnered 227 votes against 205 votes is aimed at a $1.5 trillion reduction in taxes. The Senate, to which the showdown is headed is expected to vote on its bill in the week after Thanksgiving.
Both bills would give the green light to the creation of a plan with loopholes and new deductions whose impact is that the big corporations and wealthy people in America will pay lower taxes. In the meantime, the poorer Americans, as well as those in the middle class, would feel the pinch even more since their taxes will go up.
The plan passed by the house will see the extinction of the estate tax which is charged on every wealthy individual who leaves assets of more than $5.49 million in worth to their heirs. The Senate plan, on the other hand, does not do away with the estate tax. Instead, it seeks to double the threshold of taxable estates from the current $5.5 million to $11 million. The effect of this plan is the reduction in the number of people who will pay the tax and not all the wealthy 1% is on board. In fact, many billionaires such as George Soros have come out with harsh criticisms against the bill.
Most Americans are against the plans
While there are several polls conducted in the past that show how unpopular it is to keep the estate tax, according to polling, most of the Americans still think that the wealthy do not deserve such steep tax cuts.
The latest poll conducted on the GOP tax plans clearly indicates the disapproval of many Americans. They are not happy with the middle class paying more taxes than the wealthier Americans. But perhaps somewhat surprisingly, they are not alone; the millionaires share the same line of thought. It will not be the first time that millionaires are coming out to condemn the tax plan.
Since 2010, the Patriotic Millionaires, a group made of millionaires has fought to see the streamlining of the taxation systems by identifying workarounds and loopholes that allow people in the wealthy status to find a way of evading the tax burden only to land it on the working families. They have always wanted to have the wealthier population to pay more taxes than the low-income earners.
In an interview, Morris Pearl, who is the chair of the board of Patriotic Millionaires and the previous managing director of BlackRock, gives his views on why there is an evident income disparity in the United States and how the two tax bills would only add salt to the wound.
The need to reduce the inequality
His first point was on why he thinks that the millionaires should pay their fair share of the taxes if not more. He notes that such a distinct disparity between the top people and the rest of the population can lead to civil unrests. The last thing he wants is to live in a country where the “wealthy have to live behind guarded walls and move in armored cars”. According to him the current trend of the middle class thinning over the years and most of them sliding back into the poor bottom is worrying. The gap between them and the wealthy is only but widening.
On the effect, the two bills of the House and the Senate will have on the disparity, and how that will happen, Pearl expressed his concern about the estate tax in particular. He pointed out that it is the only tax that most millionaires ever pay as many of them inherit their wealth. So, with the elimination of this tax, or the reduction of the number of people that will be eligible to pay, there will be a group of extremely wealthy individuals who don’t pay taxes on capital gains or estates. He does not think it is a good idea to have it scrapped.
How does income taxation work?
When asked to comment on the reality of what people like him have and don’t have to pay, Pearl explained how taxation works. He said that tax is only paid by someone who has an income. However, even if you are wealthy but do not have any income, you will not be expected to pay any income tax. For instance, if one inherits property but does not have any income, that is, they don’t sell any of the inherited stuff at a profit, such a person will never incur any tax expenses.
On the other hand, the working population will have to pay their taxes as usual, and the rates charged are high. The proposed plans will see the inequality rise even more since the taxes on investment income will be less than that charged on income, meaning that the individuals who have to work for a living will be paying more. That is an indication that they think that those who invest are better than those who work which is wrong.
They have support
Morris went ahead to say that most of the billionaires and millionaires in the country are with them including George Soros and Warren Buffet. The only thing that makes most of them afraid of stepping forward is that they may be seen as anti-capitalists or communists, or something of the sort.
In fact, most of those that are on Morris’ side are those who built their wealth after the American consumers bought stuff. At Capitol Hill, almost all Democrats share the same idea as the Patriotic Millionaires.