A plan to tax the rich to fund electric cars is on the ballot in California for November’s election. The proposition to repeal a law that has been on the books since 2006 would raise billions of dollars.
But before we do anything, let’s pause and ask this: Who are the people who really need a tax cut?
The answer’s not complicated: A large portion of the U.S. income pie is held (in our case, most likely, in our 401(k) plans) by the middle of the income spectrum, those making less than $75,000.
The wealthy have been making money for decades, mostly off of investment growth. It’s a dynamic model that should be in constant decline if the rich were taxed.
The most dramatic drop-off in income came in the last 10 years. The tax-cutting Republicans have been able to blame everyone from a low-tax-hike Obama to the economy for the income disparity between the rich and the rest of America.
But the reason we continue to move towards a more unequal society, and a permanent income gap, isn’t because the rich are earning more and the average person is getting a smaller share of the pie. Rather, it’s because the rich are paying less in income tax than ever before.
We pay less in federal income taxes than we did in 2007. For the second straight year, we are paying at an average effective income tax rate of 19%.
And that’s on us.
“We have more and more businesses going from high profit to high loss,” said Joe Salvo, CEO of Salvo & Associates, a New York City-based consulting firm. “They are the people who pay the corporate tax. You see them losing a lot of money.”
That’s one reason you see more and more companies leaving the country, or having a hard time getting a new one set up. These are the people who pay taxes, and have the money to reinvest.
In fact, last year only about one-fifth of these businesses made more than $1 million a year, and one-third less than one million.