ProPublica’s Bombshell Tax Report That Wasn’t

“Despite ProPublica’s best efforts to make the information enclosed within seem damning, the data tell us little we didn’t already know. For the 2018 tax year, the last year for which we have data, the top 1 percent paid over 40 percent of federal income taxes, despite earning just under 21 percent of total adjusted gross income (AGI). The bottom 50 percent of taxpayers earned 11.6 percent of total AGI, but paid less than 3 percent of income taxes. The same story holds when looking at all revenue sources too, so it’s not just the income tax that is progressive.

ProPublica, however, tries to make the case that the wealthy are getting away with murder through the tax code, so they “do a calculation that has never been done before,” comparing growth in wealth over the course of a year to taxable income. They use this to calculate an individual’s “true tax rate,” which is sort of like handing out wins in a baseball game in the middle of the early innings and calling it the “true outcome” of the contest.

It’s hard to overstate how nonsensical this comparison is (which is perhaps why it’s never been done before). Our tax system rightly does not tax growth in one’s wealth until it is realized as income. After all, the alternative is a monstrously complex and unfair system of wealth taxation that developed countries have avoided.

The reason that wealth isn’t taxable is fairly straightforward: You aren’t directly benefiting from it until it’s turned into income (at which point it is taxable). Wealthy Americans may not pay taxes on the growth that their net worth sees, but should they wish to sell assets that have appreciated in value, they would be liable for capital gains taxes on that growth.”

Here’s what the “Black tax” does to so many families — including mine

“The median Black household has a net worth of only $24,100, a fraction of the $188,200 in net worth the median white household has, 2019 Federal Reserve data shows.
And these numbers don’t always show the nuance of financial instability for many Black families. A quarter of Black households have zero or negative net worth, compared with a tenth of white families, according to the Economic Policy Institute.

The reasons for the wealth gap are complicated and multi-layered, with racism, historical injustices, structural inequality, and educational disparities all playing a huge role. So do career choices, marriage status, and inheritance levels for Black people, which are starkly lower than for white people. The practice of redlining, for example, under which the government would not guarantee loans for Black Americans who were trying to purchase homes, as well as the effect of mass incarceration on Black representation in the workforce, are just a couple of examples of how African Americans are systematically prevented from building wealth.

Consequently, here’s the harsh reality about being Black in America: The deck is often so stacked against you that the weight of it all can feel overwhelming — no matter your income, your net worth, or how much you’ve achieved. For African Americans like me, systemic inequities and generations of poverty can make it seem like whatever you’ve done is never enough, especially when you know you’ll have to help support relatives or make contingency plans for any number of scenarios out of your control.

The reality is that for those of us able to generate wealth and reach a level of comfort, we are often also financially supporting family members or paying down debt. We simply don’t have that generational wealth that so many white families have to fall back on and start out their adult lives with. Even two people earning the same income can be looking at totally different financial situations based on their race and class: One could be putting money into savings or investing, while the other might be using that same income to pay a family member’s rent or help support an aging parent’s retirement.

I know that people like my mother don’t have any real safety net other than relatives. There’s no inheritance coming. As a result, for far too many Black people, low income and low wealth translate into a lifetime of scraping by.”

“Among Black Americans, it’s not uncommon for those who can to help family members financially: Some call it the “Black tax,” a term commonly used in South Africa that refers to the obligations of first-in-the-family college graduates, professionals, or others who “make it” to assist their family members.

I’m happy to help out my mother by covering her needs when she’s short on cash. But it can be an emotional experience for her to even ask”

America’s racist housing rules really can be fixed

“Neighborhoods matter. As Vox’s Dylan Matthews reported, researchers Raj Chetty, Nathaniel Hendren, and Lawrence Katz found in 2016 that moving to a wealthier neighborhood not only increased the likelihood that kids would go to college, but also increased earnings by roughly 31 percent by the time they’d reached their mid-20s.

Part of what has kept Kennetha out of living in Franklin is exclusionary zoning. Single-family zoning, which means it’s illegal to build anything other than single-family homes, is prevalent in the suburb. Single-family homes are more expensive than apartments, townhomes, or duplexes, and that makes rent costly, too. Houses in Franklin go for an average price of $550,000, far above the average in Nashville of $335,000.

In some parts of Franklin, it is illegal to have a property smaller than 2 acres. And even in its “mixed residential district” — which allows for duplexes and multiplexes — the town has ordained minimum lot sizes that force builders to make units larger than they otherwise might have. And the bigger the apartment, the more expensive it is.”

The Truth About Income Inequality

“On a global scale, inequality is declining. While it has increased within the United States, it has not grown nearly as much as people often claim. The American poor and middle class have been gaining ground, and the much-touted disappearance of the middle class has happened mainly because the ranks of the people above the middle class have swollen. And while substantially raising tax rates on higher-income people is often touted as a fix for inequality, it would probably hurt lower-income people as well as the wealthy. The same goes for a tax on wealth.

Most important: Not all income inequality is bad. Inequality emerges in more than one way, some of it justifiable, some of it not. Most of what is framed as a problem of inequality is better conceived as either a problem of poverty or a problem of unjustly acquired wealth.”

“The Congressional Budget Office (CBO) produced a report in November 2018 on the growth of household income in each of five quintiles. Between 1979 and 2015, average real income for people in the top fifth of the population rose by 101 percent, while it rose for people in the bottom quintile by “only” 32 percent. For the middle three quintiles, average real income increased by 32 percent as well.

Or at least those are the numbers if you ignore the effects of taxes and direct government transfers. But you really shouldn’t leave those out: If you’re debating whether to increase taxes on the rich and transfers to the poor, it seems important to take into account the taxation and safety net already in place. Once the CBO researchers subtracted taxes and added welfare, Social Security, and so on, the picture changed dramatically for the lowest quintile: Income rose by 79 percent. (For the middle three quintiles, it increased by 46 percent. For the highest quintile, it went up by 103 percent—slightly more than before, probably thanks to Ronald Reagan’s and George W. Bush’s tax cuts.)”

“That’s still an increase in income inequality, of course. But it’s not an inequality increase in which the poor and near-poor are worse off. They’re much better off. Everyone is.”