How the Ultra-Wealthy (Legally) Avoid Taxes
This massive ProPublica investigation has been making the rounds this week; if you haven’t seen it, now’s your chance to get your #longread set for the weekend. The nonprofit newsroom describes how the 25 wealthiest people have seen their worth rise $401 billion from 2014 to 2018, while paying only $13.6 billion in federal income taxes. That’s a “true tax rate” of 3.4%, the outlet said.
The disconnect, of course, dates back to the definition of “income.” As Propublica notes, the early years of personal income tax, at the beginning of the 20th century, taxed primarily the wealthy, and not just on income earned from work. But just a few years later, the article says:
A woman named Myrtle Macomber received a dividend for her Standard Oil of California shares. She owed taxes, thanks to the new law. The dividend had not come in cash, however. It came in the form of an additional share for every two shares she already held. She paid the taxes and then brought a court challenge: Yes, she’d gotten a bit richer, but she hadn’t received any money. Therefore, she argued, she’d received no “income.”
The Supreme Court agreed with her. A person needed to sell a stock or other asset before it could be taxed. Since then, income taxes have applied only to income earned from jobs; capital gains are taxed differently, and increases in the value of stock and other assets are not taxed at all.
The entire piece — featuring a jaw-dropping quote from Carl Icahn — can be read here. We recommend it.
A $15 per hour Minimum Wage Would Help Half a Million Childcare Workers
A new report from the Economic Policy Institute finds that half a million childcare workers, the vast majority of them women, would see pay increases under a $15 minimum wage.
The average annual wage increase would be $2,900, the report said, with Black and Latino childcare workers seeing a slightly higher pay bump.
Childcare is increasingly unaffordable to low- and middle-income families, EPI notes, even without pay raises; in 33 states, the annual cost for childcare is more than the annual cost of a four-year, in-state college. But the think tank says that doesn’t mean low wages are a “solution” to childcare costs. Instead, it argues for capping childcare costs at 7% of a family’s income, the standard that the U.S. Department of Health and Human Services (HHS) uses to determine if childcare is affordable.
This Enormous, Ineffective Texas Corporate Tax Giveaway Is Dead
A tax break enacted in 2001 to encourage manufacturing projects to relocate to Texas will expire this year, the Texas Observer reports.
The tax break, known as Chapter 313, is the state’s largest corporate welfare program. It allows school districts to give millions of dollars in property tax abatements to companies moving into Texas or building new facilities. When the breaks expire after a decade or so, the value of the new facility will then be taxed at market rate. But a separate Texas Observer investigation found that by the time properties return to the tax rolls, they are valued at much less than expected, which has cost the state nearly $10 billion since the program began.
“While it’s normal for industrial properties to decline in value as facilities age, projects with 313 deals have a knack for losing much more value than expected,” the Observer noted drily.
Despite these clear problems, Texas has overwhelmingly voted to extend Chapter 313 three times. This year, groups inspired by similar work in Louisiana organized. Those groups included liberal policy organization Every Texan and the Texas Public Policy Foundation. Eventually, their and others’ work led the state representative who introduced a bill to extend and expand Chapter 313 to kill his own bill.
If Gov. Greg Abbott brings the issue up in a special session, the program could continue, but that seems unlikely, the Observer wrote. If it does go away, corporations would have 19 months to lock in new agreements before the program expires.
That means — says Dick Lavine, a fiscal analyst for Every Texan — “There’s gonna be a land rush to lock it in.”
This article is part of The Bottom Line, a series exploring scalable solutions for problems related to affordability, inclusive economic growth and access to capital. Click here to subscribe to our Bottom Line newsletter. The Bottom Line is made possible with support from Citi.