MICHEL MARTIN, ANIMATOR:
You’ve probably heard of this Senate Democrats’ proposal to tax certain billionaire assets to help pay for President Biden’s spending plan. You’ve probably also heard that this was one of the ideas that was not in the compromise announced on Thursday. It was removed along with popular and controversial provisions, such as free community college and paid family leave. And it also came after some of the richest people in the world refused, calling it stupid and possibly illegal. But our next guest, who has written extensively on the tax code, says it isn’t. Emory University Law Professor Dorothy Brown is with us now to tell us more.
Welcome, Professor Brown. Thanks for talking to us.
DOROTHY BROWN: It’s a pleasure to be here.
MARTIN: I just wanted to get your reaction to that, to all the – sort of back-and-forth and drama around the so-called billionaire tax and being left out of the President. Was there something about this week’s back and forth that stood out for you?
BROWN Well, what comes out is more or less the same. The billionaires with the greatest ability to pay do not want to pay the federal government anything. They prefer to pay their tax lawyers to find ways of not paying income tax. So I wasn’t surprised that billionaires pushed back. I mean, a lot of them don’t pay taxes. And all of a sudden, the thought that they might have to pay taxes got them over the top. So it was disturbing that this was left out of the bill but ultimately predictable because, as I write in my book, “The Whiteness of Wealth,” rich white taxpayers have always been able to work behind the scenes to secure laws. taxes that benefit them.
MARTIN: Let’s go sort of. I mean, like we said, some of the richest people in the world like Elon Musk who is worth some $ 300 billion tweeted that Democrats should forget about him. Billionaire investor Leon Cooperman said in an interview with The Daily Beast, I doubt it’s legal and stupid.
So first of all, you say it’s not stupid at all. You say that our tax system is based on the ability to pay and that the richest among us pay some of the lowest tax rates. First of all, why are these super rich people paying the lowest tax rates? Why is that?
BROWN: Because they’re responsible for the amount of income they technically receive under our tax laws. So they get little or no pay. They finance their way of life with loans secured by their equity investments. And under our tax law, when you get a loan, you have a repayment obligation, and the tax law doesn’t consider that as income. So they pledged their rich holdings of stocks to get a loan that finances their daily expenses, and they pay no taxes. That’s a shame.
MARTIN: As many have pointed out, under the new tax rules in this bill, millionaires, the so-called working rich, will in most cases pay more in taxes than billionaires and those with a dynastic wealth. And why is that? Is this the kind of rich who work …
BROWN: Work (laughs).
MARTIN: … make money, like you and me, just by working?
MARTIN: Why is the money you earn while awake taxed so much more than the money you passively earn …
BROWN: While you sleep.
MARTIN: … While you sleep? Yes. Why is that?
BROWN: Well, it’s because there’s a bias in our tax laws that favors income from capital, income from stocks, and disadvantages income from labor. It’s an unfair advantage, but it’s a provision that dates back to the 1920s and eventually made its way into tax law because a rich white man wanted to pay less tax.
So here we are, you know, decades later, almost a hundred years later, still dealing with this. I mean, one of President Biden’s original proposals was that those who earn more than a million dollars pay income on their stocks the same way as income on their wages. It was not included in the bill.
MARTIN: I think what underlies this kind of visceral reaction is, well, number one, as you pointed out, that the extremely wealthy had a disproportionately lot to say about how the code fiscal has been in operation since the very beginning.
MARTIN: But the bigger philosophical question – I think their argument is that their businesses and their businesses create jobs and generate wealth. And is this contribution not enough?
BROWN: They don’t all generate jobs. What we have seen during the pandemic are companies taking loans and laying off workers. We see Bezos’ tax rate lower than its warehouse workers. We see these billionaires creating problems that the federal government must then solve, and the billionaires who create the problem do not want to pay their fair share for creating the problem. So, no, there isn’t that – I mean, it’s rhetoric – is there? – that, you know, we do it all right. No, they are doing each other good.
MARTIN: And before I let you go, just for the folks who haven’t read your last book, “The Whiteness of Wealth,” how does race fit into all of this?
BROWN: Race is very relevant because when we look at who the tax-free people are, they’re usually wealthy white Americans. And it’s the wealthy white Americans who are pulling the levers behind the scenes for tax laws that benefit them. And who pays? Black Americans pay higher taxes because rich white Americans pay less, and middle class white taxpayers pay more because rich white Americans pay less. So it’s very important, when we talk about taxes, to talk about race and taxes, which the treasury and the IRS fail to do, but which I think is essential for the conversation to come.
MARTIN: Dorothy Brown is a professor of tax law at Emory University. His latest book is “The Whiteness of Wealth: How The Tax System Impoverishs Black Americans – And How We Can Fix It”. Professor Brown, thank you very much for speaking with us today.
BROWN: Thanks for having me.
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