COLUMN: Let's reward hard work, not wealth
This column orginally appeared in the La Crosse Tribune on March 21, 2016.
By U.S. Senator Tammy Baldwin
For 40 years, economic policies have rewarded large corporations and the wealthiest with the promise that their gains would “trickle down” to everyone else. It hasn’t worked. Instead, we have faced sluggish growth and economic insecurity for more and more Americans.
Today, we have a tax code that has been rigged by powerful interests to benefit corporations, millionaires and billionaires. As a result, we have an economy that rewards those at the top, while the incomes of ordinary Americans have flatlined. In Wisconsin, the economy is lagging behind other states, start-up activity ranks last in the nation, household incomes are falling and communities across our state are experiencing job loss and layoffs. In fact, recent reports have concluded that poverty in Wisconsin has reached alarming levels.
In June 2015, I, along with my colleague Rep. Sander Levin, D-Mich., introduced the Carried Interest Fairness Act. This legislation will close the carried interest loophole and require the managers of investment partnerships to pay the same tax rates on their income that most American workers pay. Currently, in exchange for managing other people’s money, fund managers take 20 percent of the fund’s profits. This is known as a ‘carried interest.’ Carried interest income is taxed at capital gains rates, which are 50 percent less than what ordinary Americans pay on their wages. This means that hedge fund managers, who are among the highest-paid people in our country, pay less as a percentage of their income than many hard-working middle-class workers.
On March 4, 2016, a column ran in the La Crosse Tribune from two leading proponents of trickle-down economics – Americans for Tax Reform and the MacIver Institute, a right-wing “think tank” funded by Wisconsin’s Bradley Foundation. The authors defended the fact that hedge fund managers on Wall Street pay less as a percentage of their income than teachers, firefighters, truck drivers and nurses. That says a lot about whose side these special-interest groups are on, when you consider the fact that the top 25 hedge fund managers are making more than all of America’s kindergarten teachers combined.
They also didn’t tell the truth about the tax reform I have introduced to make sure those at the top are paying their fair share. They make the false accusation that I went on “Morning Joe” and claimed my bill would raise nearly $457 billion. In fact, I never said such a thing.
The nonpartisan Joint Committee on Taxation recently estimated that my tax reform would raise more than $15 billion in revenue during the next 10 years. This is $15 billion that we could invest in workforce readiness, job training and small businesses—which can lead to greater economic growth and raise the incomes of working families struggling to get ahead.
While it is true that some funds invest in Wisconsin companies to grow them in a sustainable manner, what these special interest groups don’t tell you is that research demonstrates that private equity owners in general are more likely to fire workers and reduce wages—while making the companies twice as likely to go bankrupt.
The authors believe the ideal capital gains rate is zero. This would be a clear tax cut for the rich. The top one-tenth of the top 1 percent receives 47 percent of all capital gains income. The billions in foregone tax revenue would simply line the pockets of the ultra-wealthy at the expense of investments we need to make in our country’s future.
The fact is the top 1 percent have used their influence to shape the rules of the economy to reward wealth, not work. As middle-class families live paycheck to paycheck, hedge fund managers on Wall Street continue to get tax breaks because of the carried interest loophole. That’s not fair. We need to reform our tax code so that it works for all Americans. It is time to rewrite the rules of our economy so small businesses and average American families have a chance too, not just the wealthy and well?connected.
So we have a choice. We can reward the wealthy with tax preferences as the McIver Institute and Americans for Tax Reform argue or we can work together to repeal the carried interest loophole and use the revenue to invest in an economy that works for everyone, not just the wealthy few.
For me, the choice is clear.
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