I recently signed a petition to Michelle Fischbach in support of a bill that would tax the wealth of households and trusts with a net worth of at least $50 million. I was hoping to get a rise out of her, and sure enough. Fischbach’s reply didn’t just oppose this particular tax; she argues that progressive taxation in general is unfair, and she makes the bogus claim that a “progressive tax system can disincentivize individuals from seeking to produce more wealth.” She didn’t even try to claim that it would trickle down. I guess she’s just fine with ultra-millionaires keeping all that wealth.
So just to be clear, a progressive tax system is based on the principle that taxes should be based on people’s ability to pay. People who have a lot can better afford to pay taxes at a higher rate than people who have very little, and progressive taxes also serve as the most direct way of countering economic inequality. That’s no small thing when inequality, on the rise for decades, has skyrocketed during the pandemic.
Our tax system is made up of a variety of taxes, some of which are progressive and others regressive. Taxing wealth is the most progressive kind of tax, but most assets are not taxed until people die, through the estate tax. It probably won’t surprise you to learn that the tax bill passed under Donald Trump doubled the estate tax exemption, so it currently applies to only 0.1 percent of estates. Seamlessly passing vast wealth between generations is how to create an aristocracy.
Otherwise, those assets only get taxed when people sell them and have to pay capital gains. Even then, the tax rate on capital gains is significantly less than the tax on earned income. It has always struck me as strange that people pay a higher tax rate on income you actually have to work for than on income that appreciates all on its own. To his credit, President Biden proposed a 20 percent minimum tax on the unrealized capital gains of the ultra-wealthy.
Even with all the tax breaks and dodges available to the super-rich, taxes on wealth and income are still the most progressive in the mix. By contrast, property taxes and sales taxes, the kinds of taxes that local governments and school districts rely on, are regressive taxes. Owning real estate is actually a form of wealth, so taxing that form and not paper assets is going to fall more heavily on people whose home is their most valuable asset. And no matter how extravagantly the richest people spend, they’re rarely going to spend as large a share of their income on stuff as people who live from paycheck to paycheck.
Which brings me to the debate going on in the Minnesota legislature over what to do with the state’s huge surplus. Predictably, Republicans want to cut the state’s income tax. Making a permanent tax cut because of a temporary surplus is a terrible idea, but they cleverly couch it as a cut to the lowest bracket. However, even that delivers far greater benefit to high earners. The one-time checks that Gov. Walz has proposed sending out to Minnesotans would make more sense, and if tax cuts are warranted, they should help to reduce property taxes.
I can’t end this post without acknowledging the long and valuable service that Paul Marquart and Kent Eken have given to our state. They both have been champions of fair taxation, and they will be missed.
Michelle Fischbach, on the other hand, wants to make the Trump tax cuts permanent. Wouldn’t it be great to send her into retirement?