Reviews | Tax evasion and the Republican Party

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Representative Kevin McCarthy of California, the top House Republican, recently took to social media to to warn that the Democrats have hatched a despicable plot. “Democrats,” he said, “want to keep track of every penny you earn so that they can then tax you and your family to the maximum amount possible.”

Well yes. Democrats want Americans to pay the full amount they owe in taxes.

What doesn’t get enough attention is that many Republicans seem to disagree.

Resistance to taxation is the rotten core of the modern Republican Party. Over the past few decades, Republicans have sharply cut federal income tax rates on the rich and big business, but their opposition to taxation goes beyond that. They help and encourage tax evasion.

Republicans have hacked Internal Revenue Service funding for the past decade, weakening the agency. When the rich and powerful open loopholes in the tax code, Republicans reliably fight to keep the loopholes open. Indeed, they value Americans who find ways to pay less, a normalization of anti-social behavior that can be even more damaging than bureaucratic sabotage efforts.

Former President Donald Trump’s boisterous and proud statement that paying very little tax “makes me smart” was just a more cheeky articulation of what has become party orthodoxy.

The Democratic proposal Mr. McCarthy is targeting – in the video he posted online, he calls it “un-American” – would make tax evasion more difficult for the wealthy.

The IRS estimated in 2019 that Americans withhold from tax more than half of income that is not subject to some form of third-party verification like a W-2, the form the government uses to verify income. ordinary wages. This blind spot is costing the federal government hundreds of billions of dollars in unpaid taxes. In comparison, more than 95% of salary income is declared.

Under the Democrats’ current version of the plan, which is part of the Biden administration’s extensive “Build Better” legislation, banks would be required to submit annual reports on accounts with total inflows and outflows exceeding $ 10,000, excluding paychecks and government benefits. Banks would report the total amount deposited into the account and the total amount withdrawn. There would be no reporting of individual transactions. The information would give the IRS a better chance of catching cheaters – and it would provide a salutary reminder for people to pay what they owe.

The Biden administration recently cemented an international agreement to establish a 15% global minimum tax on corporate income. The much-sought-after deal would reduce the incentive for US businesses to evade tax by claiming to generate income in low-tax tax havens like Ireland and around half of the Caribbean islands – a practice which has become almost as usual in the intangible industries. like finance, technology and pharmaceutical research.

The minimum corporate tax, like the bank declaration requirement, is not intended to increase what is owed. It aims to collect what is already owed.

Another important benefit is improved tax collection. Democracy – and capitalism – rests on a lace of mutual obligations. People carry out their own responsibilities because they are convinced that others will too. Collecting taxes, especially from the rich and powerful, is an affirmation of this faith.

Felicia Wong, president of the Roosevelt Institute, a progressive think tank based in New York, said the agreement on business taxation, which includes 136 countries, is valuable in demonstrating that governments have the capacity to impose their will to multinational corporations in the service of the public interest – a model of hope for dealing with other problems, such as climate change.

“It can and should create more confidence in governance,” she said.

Both plans, however, must overcome united opposition from congressional Republicans.

The Republican Party was reborn in the 1970s under the sign of resistance to taxation, led by anti-fiscal like Jack Kemp and Ronald Reagan. This remains party fixation, the one major policy area that Congress Republicans have been able to agree on under the Trump administration.

As an ideological justification, Republicans like to speak of freedom, by which they mean a narrow and negative form of freedom from civic duty and mutual obligation.

But the fervent opposition to taxation has always found its deepest sources of motivation in the concern of how the money will be spent. In the flagship case of California, the rise of anti-tax activism was inextricably linked with the decline of a white electoral majority. It was not about whether Americans should ever be forced to help each other. The real question was who would be helped.

Opposition to progressive income tax also draws its strength from an imagined democratic ideal in which the people who vote tax, pay taxes and get the benefits are all the same.

The story tells another story. From the outset, taxation in the United States was conceived as an antidote to inequality. The government initially chose to increase its income through tariffs collected from wealthy traders. The introduction of a federal income tax at the turn of the 20th century was a different way to achieve the same goal. In a historical analysis published last year, two German political scientists, Laura Seelkopf and Hanna Lierse, showed that progressive taxation is a hallmark of democratic governance.

Political philosophers have long worried that democracy allows the poor to plunder the rich. The reverse turned out to be more true. Progressive taxation is not a threat to the rich. It is a small price to pay for prosperity.

Cutting taxes to starve social programs is, in itself, a threat to the sustainability of the American experiment of multicultural democracy. By allowing resistance to legal taxation, the Republicans are launching an even more direct assault.

Having failed to restrain government spending through the democratic process, they seek to undermine government.

Mr. McCarthy is right to present a fairly technical change in tax rules as an issue that goes to the heart of American democracy. Democracies impose higher taxes than other forms of government because democracies are communities of common goals. We create and maintain our society through our contributions.

Or we don’t. And things fall apart.



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