According to data from Wyden’s committee, American megacorporations spent a record $806 billion on the buybacks, up 55% compared the year before. That’s just what the biggest and wealthiest corporations spent on the buybacks, driving up stock prices and CEO compensation and avoiding taxes on all of it. “In 2021, as millions of families are struggling through the pandemic, corporate stock buybacks should approach, or even surpass, this record,” the senators said. “To put that in perspective, the median household in the U.S. has a net worth of $97,300, with Hispanic ($38,000) and Black ($23,000) families even less.”
“Instead of spending billions buying back stocks and handing out C.E.O. bonuses, it’s past time Wall Street paid its fair share and reinvested more of that capital into the workers and communities who make those profits possible,” Brown said in a statement Friday.
The other proposal Wyden and Brown are considering is changing the rules for large business partnerships. The rules currently in place were written when partnerships were generally small businesses, like law and doctor’s offices. Large corporations have exploited those rules, allowing them to create complex partnership arrangements that help them juggle losses, deductions, and profits to evade taxes. The arrangements are often so complex that IRS agents must have assistance from IRS lawyers in trying to conduct audits, and the IRS simply doesn’t have that capacity thanks to budget cuts. So these partnerships are virtually never audited.
“The constant theme running through our tax code is, paying taxes is mandatory for working people, but optional for wealthy investors and mega corporations. That’s especially true when it comes to pass-through businesses and partnerships, the preferred tax avoidance tools for those at the top,” Wyden told The New York Times. He is proposing a change how both profits and debts are handled, ending the ability of partners to parcel them out disproportionately to avoid taxes. Those rule changes could raise $172 billion over 10 years, Congress’s Joint Committee on Taxation estimates.
Biden’s original plan included a perfectly reasonable proposal to repeal the “step up in basis” rule, which eliminates capital gains taxes on appreciated assets before they’re inherited. As of now, when estates are passed down, assets are assigned a value at the point they change hands. Should the assets—which are already treated differently from income earned as wages—be sold later, they are taxed on appreciation in value assessed at the point of transfer, instead of the appreciation from their original value. That means a lot of tax is avoided, and Biden wanted to change that, basing the new tax on their appreciation from the point the assets were acquired.
Cue the “family farm” lobbyists, starting with former Democratic Sen. Heidi Heitkamp of North Dakota. She’s got a “well financed” group pushing the line that this is “death taxes” for “family farmers” and disastrous politics. That line worked with the aforementioned Sen. Jon Tester.
“The stepped-up basis proposals Senator Tester has seen to date would have a devastating impact on Montana’s family farms, ranches, and small businesses, and he is going to keep fighting to defend those folks from shortsighted policies that put their continued operation in jeopardy,” a Tester spokesman told HuffPost this week.
However, what Biden proposed would not have hurt family farms. Or ranches. Or small business. Not unless the owners were super-rich. Biden’s plan would have only taxed these capital gains for individuals already worth more than $1 million, less than 3% of all households. Furthermore, owners of family businesses could defer the taxes for as long as the business stays in the family. “Biden structured his proposal to avoid taxing family farmers,” Steven Rosenthal, a senior fellow at the Tax Policy Center, said. “The argument is a new version of an old scam. […] It is repugnant.”
But it still works. The Biden proposal could raise more than $200 billion over 10 years, and that burden would be on the super-rich, the 1%. This proposal isn’t dead yet, but it’s in trouble.
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