Some Things Just Never Change
Are Republicans again planning to stack the deck in favor of the ultra-rich? And why hasn't Congress done anything about it for 30 years?
It seems like the Republican Party has always been identified as the Party of the ultra-rich. About 43% of billionaires identify as Republican, compared to 33% who identify as Democrats. The balance, some 24%, claim no political affiliation. So the majority of the so-called "1%-ers" are Republicans [3]. Even among the more mainstream income distribution categories, there is also a fairly strong weighting of Republicans toward higher income "buckets" [1].
While the politics of other billion-dollar families are sometimes difficult to ferret out, of the 50 richest families, 28 mainly donate to Republicans and only seven contribute mainly to Democrats [4]. This past election cycle, nearly half of the funding (47 percent) raised by the two major Republican congressional super PACs came from just 27 billionaires, as revealed in a 2022 report from Americans for Tax Fairness [5]. That’s $89.4 million, straight from the pockets of over two dozen of America’s richest people.
Billionaires have been donating in large amounts to Republicans for years. They gave $240 million in total to Donald Trump, for instance, during his 2016 and 2020 presidential runs. And, because Citizens United v. FEC opened the door for super PACs to spend unlimited amounts on campaigns with very little strings attached, this problem has only worsened over the past decade.[5]
And those Billionaires have also been able to accumulate enough money to donate in such huge amounts due to the U.S tax system — thanks largely to Republicans but also in part to Democrats — which overwhelmingly favors the rich. [5]
One reason for this is that the Republican Party of recent memory has always had a long-term commitment to promoting tax loopholes that allow the ultra-rich and largest corporations to avoid paying (or significantly reduce their) income taxes. Additionally, it is also clear that the ultra-rich also have a level of access to politicians that none of us "regular folks" have, or will ever have. This is, of course, a rather clear-cut case of class warfare - and it’s not new.
The tax breaks enjoyed by the ultra-rich include many measures like the carried interest loophole, which allows the private equity managers and venture capitalists to pay only 20 percent in taxes on their incomes rather than the top income tax rate of 37 percent. Over the first two years of the pandemic, the 27 billionaire GOP donors collectively added a towering $82 billion to their wealth of $227 billion — an increase of 57 percent.[5]
When the Biden administration pushed for passage of the Inflation Reduction Act, there were hopes it would take a step toward fairness by adjusting tax rates or policies for the wealthy and by strengthening the Internal Revenue Service's capacity to ensure people and corporations pay what they owe. But that hasn't happened. We don't have a system that taxes the wealthy equitably. And there were efforts proposed to address this by the Biden administration and by Democrats. But in the end, they did not do anything to address taxes on the wealthy and particularly the ultra-wealthy in any significant measure. [7]
The progressivity of the U.S. tax system has dramatically declined over the past seven decades. The upshot is that, for most income levels, the U.S. tax system now resembles a flat tax that becomes REGRESSIVE at the very top end, meaning the super-rich pay proportionately LESS. Today, virtually all income groups pay roughly 28% of their income in taxes—except for the 400 richest Americans, who each own more than $2 billion in wealth today and pay around 25% in taxes. In 1950, the super-rich paid about 70% of their income in taxes. By 2018, they paid only 23% -- which was less than the bottom 10% of all earners! [6]
So it's no surprise that when Kevin McCarthy was finally elected speaker of the House after 15 ballots, one of his first comments was: "When we come back, our very first bill will repeal the funding for 87,000 IRS agents," He went on to state that "We believe government should be to help you, not go after you." Essentially, this was code for "we are going to make sure that our ultra-wealthy campaign contributors are protected."
One might argue, as McCarthy and other Republicans have, that the IRS is too large. However, as always, we need to look at history to understand the present. Beginning in 2010, the IRS has been systematically gutted, coincident with the Republicans taking over Congress and slashing the budget. The result of all this is an agency that is today on life support. [7] The IRS budget is down in real dollars, about $2 billion and it's projected annual budget is projected to be about a $13 billion. So this was a very significant budget cut that resulted in tens of thousands of employees leaving the agency in recent years. As a result, audits for the wealthy have collapsed by 80%. In the past, the largest corporations were audited more than once a year because the IRS was there every single year and sometimes auditing multiple years simultaneously. Now, barely half of the largest companies get audited every year, and the audits are much thinner.
The Inflation Reduction Act, a law passed by Democrats in 2021 aimed at lowering inflation, also included funding for the new 87,000 additional IRS agents. The bill passed the House on party lines and has faced conservative criticism.
Republicans have seized on this aspect of the bill in their campaign messaging, running on opposition to the hiring of additional IRS agents. They have said these agents will be used to target everyday Americans or small businesses. However, the IRS has clearly stated in the past that the increased number of agents will not equate to a higher audit rate for low and middle class taxpayers. Moreover, Treasury Secretary Janet Yellen directly pledged that the IRS restaffing which was passed as part of the Inflation Reduction Act would not be used for audits on people making less than $400,000 a year. [8]
The new agents were intended to monitor digital currency to ensure citizens don't illegally evade paying their taxes, with the Inflation Reduction Act set to raise $124 billion in revenue from collecting taxes over a 10 year period from the rich and large corporations.
In retrospect, the portion of the Inflation Reduction Act aimed at increasing IRS funding was simply a measure to restore previously lost funding, so that graft and corruption among the ultra-rich and the largest corporations could be weeded out.
So, to nutshell this, the proposed de-funding of the IRS that was announced by Speaker McCarthy will actually result in a significant additional budget DEFICIT! A new Congressional Budget Office report concluded that canceling the funding to restaff the IRS would save about $71 billion — but would also reduce tax revenues by $186 billion due to reduced enforcement, for a deficit increase of $114 billion! [8] Ostensibly, the Republicans call this “leadership".
As usual, this is tantamount to a “he said - she said” argument - like many of those that occur in Congress each and every week of each and every year -- and it's the kind of argumentation that has made our Congress so dysfunctional for over 3 decades. We just can't seem to get anything done in Congress, even when there is broad public support for an initiative.
The bottom line here is that Kevin McCarthy is the kingpin in a lightly-veiled Republican campaign against the IRS to protect corporations and the wealthy who, for decades have been able to avoid taxes and their fair share of tax burden.
It sure looks like a stacked deck to me and, perhaps more importantly, it looks even more like the Republican-controlled House of Representatives in the 118th Congress and speaker McCarthy will do their best to make sure it stays that way!
[1]https://www.pewresearch.org/religion/religious-landscape-study/compare/party-affiliation/by/income-distribution/
[2]https://www.fastcompany.com/90735220/the-fight-to-tax-the-super-rich-wealth-tax
[3]https://www.forbes.com/sites/chasewithorn/2020/10/20/even-americas-billionaires-are-tilting-toward-biden-in-the-2020-presidential-race/?sh=68d66bc92bb7
[4]https://www.forbes.com/sites/katiasavchuk/2014/07/09/are-americas-richest-families-republicans-or-democrats/?sh=661e4df63e83
[5]https://truthout.org/articles/nearly-half-of-gop-congressional-pacs-2022-funding-comes-from-27-billionaires/
[6]https://www.fastcompany.com/90678054/how-u-s-taxes-on-the-wealthy-have-taken-a-70-year-slide-away-from-progressive-taxation
[7]https://www.npr.org/2022/08/25/1119412217/how-the-ultrawealthy-devise-ways-to-not-pay-their-share-of-taxes
[8]https://thehill.com/homenews/house/3805913-cbo-gops-irs-bill-will-add-114b-to-deficit/