The Presidential Candidates Need to Talk about Taxes
In the lead up to the Democratic and Republican National Conventions, we're producing a three-part series on major themes of the 2016 election season and policy reforms that Prosperity Now believes should be at the center of the national debate. We kick off today with a focus on economic inequality and the role unfair tax programs play in holding back opportunity. Tomorrow's post by Shira Markoff focuses on higher education access and success, and the game-changing potential of children's savings policy. Finally, on Thursday, Emanuel Nieves focuses on the growing racial wealth divide and strategies for expanding racial equity as we boost economic opportunity.
While the country's political parties convene later this month in Philadelphia and Cleveland, it will be impossible to ignore the nation's growing calls to address inequality and stagnating economic opportunity. Americans on both sides of the aisle recognize that our country's economic and political systems reward the rich, miss the middle and penalize the poor.
Addressing these issues means identifying the reforms that will actually expand opportunity and reduce inequality. And this means focusing on tax programs.
Tax programs? Bear with us. We get it. Taxes seem complicated, boring or even irrelevant. But unfair tax programs drive a great deal of economic inequality, and it's crucial that we understand them for one simple reason: that's where the money is. Come convention time, the political parties can't talk about economic and social justice issues without talking about enormous, upside-down tax programs, because few others factors have as big an impact on stagnating opportunity and growing wealth inequality.
While income inequality is bad, wealth inequality — the homes, businesses, college degrees, and savings that people actually own — is far worse. Wealth inequality has soared to Great Depression-era levels, abetted by federal policies that concentrate wealth at the top while doing little to support most Americans. Today, a near-majority of U.S. households are financially insecure, including millions of families in the middle class. At the same time, we have created staggering gaps in wealth ownership between men and women and between white households and households of color.
In fact, Congress spent $660 billion last year to help Americans build wealth, and all of that money flowed through the tax code. We spend about as much on tax programs for higher education that go to families of means as we do on Pell Grants for low-income students. We spend multiple times more on tax programs for homeownership than we do on rental support for poor families. And we spend hundreds of times more on tax-advantaged savings programs that predominantly benefit the wealthy, than we do on low-income financial security programs.
These federal programs are the most unfair social programs out there. A typical millionaire gets nearly $150,000 from these tax programs in a given year. A working family making less than $50,000 barely gets $150. Yes, that's right: we're spending about 1,000 times as much to help millionaires build their wealth as we do to help lower-income families. That's what we mean when we say "upside down."
When folks cry foul and say that the American economic system is unfair, they're absolutely right — that unfairness is baked right into our tax code and has been for a very long time.
Think about what we could do if we spent that funding fairly — that's the premise of the Turn it Right-Side Up Campaign. By simply turning these upside-down tax programs right-side up — and without spending an extra dime — we can help all Americans build wealth. This means:
- Universal savings accounts to boost the aspirations and opportunity of every newborn
- Homebuyer & homeowner support to help every household build wealth
- Rainy day savings to help every family weather life's unexpected storms
- Retirement savings to ensure every retiree can be financially secure
In short, turning these tax programs right-side up means more economic opportunity and less financial insecurity. It means that millions more Americans can graduate college, buy a home or start a business. And it means that all Americans and our economy are better off overall and moving in the right direction together.
The political and policy discussions at this year's conventions are all about the direction of our country, which will include a broad discussion of ways to address the growing problem of economic inequality. We hope that wealth inequality and unfair tax programs play a central role in these discussions and beyond. Prosperity Now and the Turn it Right-Side Up Campaign will continue to highlight these problems and how to fix them. We invite you to join us in help making this change a reality.
Check back tomorrow for Shira Markoff's post on the debate over higher education access and success, and the potentially transformative role of CSA policy.