Project 2029 - 4 Taxes

Dear Friends,

 

As I have said before, there are many ways to improve the lives of working people.  One is to reduce their cost of living.  In the next few posts, I will discuss various ways to reduce the cost of living for working people.  

Today, I will focus on taxes.  Working people pay a wide variety of taxes – income taxes, payroll taxes, real estate taxes, sales taxes, gasoline taxes, license fees, etc.  Theoretically income taxes are progressive, but the other taxes are regressive.  In the long-term, we should strive to eliminate the regressive taxes and make up the lost revenue with higher income, estate and other taxes which can be very progressive.

 

As I indicated in a prior post, our economic system is broken and rigged in favor of the rich. Consequently, there has been a huge redistribution of wealth from lower, middle and even moderately wealthy people (the 99%) to the ultra-rich (the 1%). 

 

A Federal Reserve study on household wealth from 1989 to 2025 demonstrates that during that period 

·      the wealth of the top 0.1% increased 67% 

·      the wealth of the rest of the top 1% increased 22.5%

·      the wealth of the rest of the top 10% decreased by 4%

·      the wealth of the 50% to the 90% decreased 18.2%

·      the wealth of the bottom 50% decreased by 26.5%

 

In fact, wealth inequality in the United States has steadily grown since 1980 and hit its highest level in 2025. https://economicsinsider.com/us-wealth-inequality-1965-2025/

 

There are many causes for this transfer of wealth, but in my view one of the root causes has been the tax policy since the Reagan era when trickle-down economics became the mantra for Republicans.

 

To quote again from my prior post:

 

The maximum individual income tax rate has fallen over time, and the amount of income it applies to has also fallen.

 

In 1950 the maximum rate was 91%, and it applied to income over $400,000 ($5.4 million).

In 1975 the maximum rate was 70%, and it applied to income over $200,000 ($1.8 million).

In 2000, the maximum rate was 39.6%, and it applied to income over $288,350 ($542,659).

In 2025, the maximum rate was 37%, and it applied to income over $751,600 ($751,600)

 

The dollar amounts in parenthesis are the amount expressed in 2025 dollars.  As you can see the wealthy are not paying anywhere near their fair share, if you define fair share as what they were paying in 1950 or even 1975.

 

The same is true for estate tax rates and exemption amounts.

In 1954, the maximum rate was 77% on amounts over $10 million ($118 million).

In 1977, the maximum rate was 70% on amounts over $5 million ($27 million)

In 2009, the maximum rate was 45% on amounts over $3.5 million ($5.3 million)

In 2025, the maximum rate was 40% on amounts over $14 million ($14 million)

 

During a very prolonged period of economic growth in the United States, the income and wealth inequality grew because the rich could keep more income and assets which could be invested and reinvested while the other 99%’s percentage of the wealth was declining.  

In addition to the reduction in tax rates, there has been an increase in both legal and illegal tax avoidance. The rich can avoid selling assets to cover their living expenses or to make other investments by borrowing against their wealth.  This technique avoids selling assets which means they do not recognize any of the gain and thus do not pay taxes.  Using leverage to make additional investments also greatly enhances the return on investment.  

 

We need to change the tax policy to be fairer and to reverse the significant transfer of wealth from the 99% and especially working people to the ultra-rich.  This change in policy is also necessary for the government to improve the lives of working people and to protect our democracy from being controlled by the ultra-rich. I would suggest several philosophical changes:

·      All income should be treated the same – wages, interest, dividends, capital gains, rents, etc.  There is no reason that income from working should be taxed at a higher rate than income from the investment of capital.

·      Payroll taxes should either be abolished or applied to all income but keeping the benefit in place.  If payroll taxes are abolished, the benefits must be provided from the general revenues of the government.

·      All regressive taxes should be eliminated and the programs paid for by those taxes should be paid for by progressive taxes.

·      An amount of income per household equal to approximately the living wage for that household should be exempted from income taxation.  Why should the government tax any amount below a living wage, only to put the household’s income back below the living wage level.

·      The US seemed to thrive economically in the 1950s.  We should return to a level of taxation similar to that of the 1950s.

·      We need to institute an annual wealth tax.   

·      We need to fully fund the IRS so that they can improve compliance by the ultra-rich.

 

I propose the following individual income tax rates.  Keep in mind that all income will be treated the same.  After reviewing the MIT Living Wage Calculator, I propose that the living wage that should be excluded from taxable income is $100,000 for a four-person household.  Regular deductions, etc. would also be deducted from taxable income.  I propose the following tax rates for married filing jointly:

 

$0 to $400,000	15%
$400,001 to $1,000,000	35%
$1,000,001 to $5,000,000	50%
Over $5,000,000	80%

 

Keep in mind that in 1950, the maximum rate was 91% on income over what in today’s dollars would be $5,400,000.

 

For the estate tax, I would suggest a simplified approach:

 

Less than $15,000,000	0%
$15,000,001 to $100,000,000	30%
$100,000,001 to $500,000,000	50%
Over $500,000,000	80%

 

Keep in mind that in 1950, the maximum rate was 77% on amounts over what in today’s dollars would be $118,000,000.

 

In addition to reforming the individual income tax and the estate taxes, we need to institute an annual wealth tax. This type of tax is needed to redress the overwhelming redistribution of income and wealth from working people to the ultra-rich and to raise additional income for the government to help make the lives of working people better. I would propose the following wealth tax on the net worth of a household.

 

Household Net Worth	Taxation Rate
Less than $500,000,000	0%
$500,000,000 to $1,000,000,000	10%
$1,000,000,001 to $50,000,000,000	20%
Over $50,000,000,000	30%

 

I know that there are many people who think that raising taxes on the rich and/or enacting a wealth tax will be bad for the economy.  Bernie Sanders has proposed a 5% annual wealth tax on billionaires which as you can tell from my proposal, I don’t think is enough.  The Tax Foundation posted an article against the idea where it argues that the tax will not raise as much money as its proponents claim because of  increased avoidance and the administrative complexity. That argument is hardly persuasive – don’t do it because it won’t raise as much money as you think because the rich will find ways to avoid it.

 

The proposed billionaire’s tax in California has also brought out the critics.  Their biggest objection is that the billionaires will move out of California.  That is a terrible argument against the California tax and disappears when we are talking about a nationwide tax.  Here is an oped in the New York Times that discusses the objections to the California tax and why those objections should be dismissed.    

 

These proposed tax rates and levels are just ideas.  The actual rates and levels would need to be decided upon after these ideas are analyzed and impacts calculated using actual statistics.  

 

The critical points are that 

·      the rich and particularly the ultra-rich need to pay their fair share which is much more than they pay today, 

·      we need to eliminate the extreme wealth and income inequality, and

·      we need to fund more programs to improve the lives of working people.

 

Thanks for reading and please comment,

The Unabashed Liberal

Project 2029 - 3 A Living Wage

Dear Friends,

 

There are many ways to improve the lives of working people.  Some of them are purely financial – increasing their incomes and/or reducing their cost of living.  There are also non-financial issues that impact the quality of life of working people – safe crime free communities, high quality schools and daycare, healthy environment.

 

Today, I want to discuss one aspect of improving the lives of working people – a living wage.  This term has many descriptions.  At its lowest level a living wage is an amount sufficient to provide a decent standard of living, including housing, healthcare, food, and education.  The MIT Living Wage Calculator https://livingwage.mit.edu/pages/methodology uses the following definition of a living wage:

 

The Living Wage Calculator was originally developed in 2003 to comprehensively estimate the employment earnings—or the living wage—that a full-time worker requires to cover or support the costs of their family’s basic needs where they live. Today, the calculator features geographically-specific costs for food, childcare, health care, housing, transportation, other basic needs including household goods, personal care items, and broadband, and taxes at the county, metro, and state levels for 12 different family types.

 

In my view that definition is the bare minimum for the richest country in the world, and for us the definition should also include the ability to save for extras and for retirement as well as provide a basic level of entertainment and vacation.  Nevertheless, for the purposes of this post, I will use the MIT Living Wage Calculator.

 

A living wage is well above the poverty level.  For the continental US, the poverty level for a one-person household is $15,960 a year and for a four-person household is $33,000.  A full-time employee earning the federal minimum wage would earn $15,080 a year.  Please note that the federal minimum wage does not provide sufficient income for a person to escape poverty. 

 

The MIT Living Wage calculator calculates that in Minnesota (I used it because that is where I live) for a one-person household a living wage is $48,475, and for a four-person household of two adults (both working) and two children a living wage is $131, 549.  As you can see for a one-person household the living wage is 3 times the poverty level and for a four-person household is almost 4 times the poverty level.

 

The federal minimum wage is currently $7.25 and has not been increased since 2009.  If the federal minimum wage had increased with inflation, today it would be about $11.25.  Based on inflation, the federal minimum wage should have increased 55% instead of staying the same.  https://www.usinflationcalculator.com  If you consider the federal minimum wage in light of productivity gains by workers, you get a similar although less dramatic result.  Since 2009 non-farm worker productivity has increased 31.24%. https://fred.stlouisfed.org/series/OPHNFB/  On that basis the federal minimum wage should have increased to $9.51.  

 

Regardless of the calculation, the federal minimum wage needs to be increased substantially.  It is below the poverty level, it has not kept pace with productivity gains, and it has not kept pace with inflation.  

 

Fortunately, many states have higher minimum wages, and the law provides that an applicable state minimum wage takes priority if it is higher.  Thirty states plus the District of Columbia, Guam, Puerto Rico, and the Virgin Islands have minimum wages higher than the federal minimum wage.  Thirteen states plus the Northern Mariana Islands have minimum wages equal to the federal minimum wage and seven states and American Samoa have either no minimum wage or a minimum wage less than the federal minimum wage.  Those seven states are Alabama, Georgia, Louisiana, Mississippi, South Carolina, Tennessee and Wyoming.  https://www.dol.gov/agencies/whd/mw-consolidated#2  

 

Obviously, increasing the minimum wage would improve the living conditions of working people.  There are many studies on what the various impacts that would obtain from raising the minimum wage.  The negative impacts most often cited are a potential reduction in employment of low wage earners and an increase in prices. Unfortunately, most of these studies fail to take into account other actions that the federal government could take to offset the negative impact of raising the minimum wage on working people, like changes in the income tax rules, increasing other benefits available to working people and the impact of enforcing anti-trust laws.  

 

The Congressional Budget Office has a detailed study of the impact of raising the minimum wage based on a 2023 bill.   https://www.cbo.gov/publication/55681  I do not recommend you try to understand that study unless you really like to get into the weeds.  The Peter G. Peterson Foundation has also done a study which includes data from the CBO, but it is much more understandable.  The Peter G. Peterson Foundation is very concerned about government debt and has a right leaning philosophy, but it is regarded as being an unbiased reporter of facts and analysis. 

https://www.pgpf.org/article/heres-how-raising-the-mForinimum-wage-would-affect-everything-from-household-incomes-to-the-national-debt/

 

For a more labor friendly analysis I would suggest a study done by the Economic Policy Institute of a 2025 bill raising the minimum wage. 

https://www.epi.org/publication/rtwa-2025-impact-fact-sheet/  This study indicates that 22,247,000 workers would be impacted with an average increase of $3,200 per worker.

 

All of these studies indicate that raising the minimum wage would be a boon to working people, but there may be some negative side effects that could hurt other working people.  In the richest country in the world, we cannot continue to deny working people a living wage.  If the Democrats are going to regain the support of working people, they must push hard for a package of laws that would among many other things increase the minimum wage and offset any the negative impact of doing so. 

 

Thanks for reading and please comment,

The Unabashed Liberal

 

 

 

 

 

Project 2029 - 2

Dear Friends,

 

There are two broad goals that the Democrats must address in Project 2029 – improving the lives of working people and improving our democracy.  There are, of course, many other goals, but if the changes are made to improve our democracy, many of the other goals can be achieved through normal democratic processes.  

 

There are two prerequisites to achieve these broad goals – elimination of the filibuster in the Senate and significantly enlarging the Supreme Court.  Other than legislation that can be shoehorned into a reconciliation bill, the filibuster will need to be eliminated to pass the legislation needed to accomplish the two broad goals.  In addition, the concept of the unitary executive, currently in vogue with the radical right majority on the Supreme Court, will need to be defeated.  Under the unitary executive theory, the President can do what Trump has done – ignore the legislation and the authorized spending and just do those things that (s)he wants. 

 

So, every Democrat running for the Senate must be asked “what legislation will you fight for that will improve the lives of working people and will improve our democracy?”.  The follow up question is “will you work to and vote for the elimination the filibuster and the enlargement of the Supreme Court?”.  If the candidate is not willing to eliminate the filibuster and enlarge the Supreme Court, they are not serious about improving the lives of working people or improving our democracy.  Without eliminating the filibuster, the legislation cannot become law; and without enlarging the Supreme Court, a President can avoid duly executing the law. 

 

The goal is not to look like we are fighting but to take action that improves the lives of working people and improves our democracy.

 

Thanks for reading and please comment,

The Unabashed Liberal