Our friends at the Center for American Progress put on a great virtual event last week with Senator Sherrod Brown, discussing how the U.S. tax codes favors the wealthy and the tools Congress plans to use to rebalance the tax system.
You can watch video of the event here: https://www.americanprogress.org/events/2021/06/21/500822/billionaires-paying-no-taxes/
The Secret IRS Files: Trove of Never-Before-Seen Records Reveal How the Wealthiest Avoid Income Tax: https://www.propublica.org/article/the-secret-irs-files-trove-of-never-before-seen-records-reveal-how-the-wealthiest-avoid-income-tax
Nick’s twitter: @NickHanauer
Hey Pitchfork listeners, you may be familiar with a recent report from ProPublica showing that America’s billionaires are paying almost no taxes. While our friends at the Center for American Progress recently held an event on the topic featuring a conversation between Senator Sherrod Brown of Ohio and John Podesta, the founder of CAP. We thought it was a great conversation so we’re just dropping it into our feed and we hope you enjoy it.
Good afternoon and thank you for joining us. I’m Lily Roberts, Managing Director for Economic Policy at the Center for American Progress. Today we’re discussing fairness in our tax code and who better to discuss that topic than Senator Sherrod Brown of Ohio, a champion for tax fairness and for economic fairness. As a Clevelander myself, I know that Senator Brown is also a champion for the people of Ohio. So I wanted to wish him well on a very special occasion, this week is the five-year anniversary of the 2016 World Championship Cleveland Cavaliers. I think the 2016 Cavs are almost as popular in Ohio as Senator Brown is. But back to taxes, Senator Brown chairs the Committee on Banking, Housing and Urban Development. Especially relevant for today’s event is that he’s a senior member of the Finance Committee, which has jurisdiction over the tax code.
Taxes have been in the news lately for several reasons, including this month’s bombshell report from ProPublica. We learned that in recent years, some of the country’s wealthiest people have paid a pittance in income taxes in relation to their massive gains in wealth. In many ways, ProPublica’s report revealed what we already knew, or at least what we suspected, that America has two tax systems. One is for the super wealthy, where they decide when and where, and sometimes if, they pay taxes. While they pay special low rates on much of their income. And there’s another tax system for workers, taxes are withheld directly from each paycheck that’s earned. The way the tax code favors wealth over work has worsened economic inequality and the racial wealth gap. But this year, Congress has an opportunity to lay the groundwork for a more inclusive economy.
The Rescue Act, signed by president Biden in March, took the first steps in that direction. One of the biggest steps was the expansion of the Child Tax Credit and the Earned Income Tax Credit, based on legislation sponsored by Senator Brown. In just a few weeks, more than 90% of families with children will begin receiving monthly installments of the expanded Child Tax Credit. It’s a truly historic achievement that will slash child poverty and help build a better future for tens of millions of American kids. Over the coming months, Congress has a chance to make those enhanced tax credits permanent and to address the broader issues of tax fairness. We’re thrilled that Senator Brown is here to discuss these plans. After his initial remarks, he’ll be joined by CAPs founder and chair, John Podesta, for a conversation including questions that you can submit through the Q & A tab on Zoom. Senator Brown?
Senator Sherrod Brown:
Lily thank you, it’s an honor to be here and thanks for introducing me. And the fifth anniversary of the Cavaliers, considering it was the year 2016, much of that year should be wiped off the calendars. Maybe you ought to try something different in the introduction next year, but thank you, that was really nice. I appreciate that. And it’s always going to be with John Podesta, thanks for the work that you did. And I will be brief because I have to cut a little short for a vote and I want to take questions from John and just have a conversation. But thanks for bringing up what you said about the ProPublica report. We know that we have a system that works for billionaires, and works for the largest corporations, and frankly, pretty much nobody else. And this is a different time in our country. Now we have a chance, with this administration and this Senate, as narrow as the margin is, to go big. And in ways we haven’t in a long time.
I always say progressive’s don’t win all that many times, but when we win, we really go big. And you can look at the times in our history when we’ve done that and made a huge difference for the country for decades. And that’s where we are now, we’ve spent years leading up to this, watching politicians in Washington hand out tax cuts to corporations and wealthy elites. We end up with a system, as you’ve pointed out Lily, and as you all know, pay less in taxes, sometimes, than a teacher or a truck driver or a restaurant server. People are more than angry about it. It’s why a lot of Americans, a lot of people in Cleveland, Lily, and in Ohio and across the country, simply don’t trust government. It’s hard to blame them when they’ve watched politicians reward their rich friends and refuse to go after white collar tax cheats while auditing working class Americans.
We have a system where that truck driver or server is more likely to get audited than a hedge fund manager. And that’s not to mention decades of a trade policy and a tax policy that encourage companies to shut down production in Dayton or Youngstown and reward them with weak environmental laws and any unenforced labor standards and tax breaks for moving jobs to Mexico or China. We have an opportunity, and we’re taking it this year, to show America different vision. A vision that puts our country first. It puts our workers first. We will now have a trade policy that centers around workers, not the largest corporations in the country. A lot of this we’ve done in the Rescue Plan. The tax credits we passed are for the vast majority of American families. 92% of children in my home state of Ohio, 92% of children, and so that’s in the great majority of families in the state, are eligible and will take advantage of the Child Tax Credit.
It will lift 40% of people in this country out of poverty. And even those who are desperately poor, it will move them closer to being out of poverty. Not enough, but it’s what we need to do. I’ve talked to a mother from Cleveland this week. She said she’s going to use the CTC to help her pay for childcare so she can go back to work for her family. That’s the whole point of this. It gives kids opportunity that wouldn’t have had opportunity before. We need to make those expansions permanent. Center for American Progress always weighs in on these issues in that way. I know you’ll be part of it, we need to make sure while we make the Child Tax Credit permanent, we make the wealthy and the largest corporations pay their fair share for the infrastructure. When I say infrastructure, it’s not just highways … It’s not what Mitch McConnell says, just highways and bridges and maybe a water and sewer system here and there. It’s childcare, it’s broadband, it’s the Child Tax Credit, it’s the Earned Income Tax Credit.
It’s building a foundation so low income and moderate income families have an opportunity for the American dream. We know that no company succeeds on its own. The vast transportation network that gets an Amazon box from the warehouse to a family door wasn’t built by Amazon, it’s not maintained by Amazon, we all pay for that. So should the corporations that rely on those public goods to make their vast growing profits. Infrastructure, it is transportation, it’s also the VA Healthcare system. It’s housing, it’s broadband, it’s public education. It’s everything that CAPs fought for, that a lot of us in the Senate and House have passed and fought for. Our vision on taxes, and I’ll close with this and then John and I can have a conversation. There’s a clear break with the trickle-down economics from the past. We know how we grow the economy best from the middle out, we’ve tried time and time again. You cut taxes on the rich, it’s what the Republicans, why they run. It’s how they govern. It’s what they always do.
That you cut taxes for the rich, they say it’ll trickle down, it never does. We believe in building the economy from the middle out. That’s why the Child Tax Credit, that’s why the Earned Income Tax Credit, that’s why we want to invest in broadband, why we want to invest in family policy. We show people that government’s on their side with the CTC check, with infrastructure, with investment in their communities, with an economy that delivers good paying jobs. And I mentioned in the beginning, people’s cynicism and suspicion and mistrust of government, so much of that we’ll be on the road to fixing that. When people see that, oh, my government’s actually on my side.
I want voters in Macon, Georgia, in the summer of 2022 to say, “I voted for Joe Biden and Kamala Harris. I voted for Ossoff and Warnock and my life got better.” And that’s really what this is all about, to deliver, to make people’s lives better, to remind them that 50 Democrats voted for the Child Tax Credit, plus the vice-president. 50 Republicans voted against it. On every one of these issues we know who’s on the side of the American public and we move forward. John, questions from … John Podesta, conversation? Thanks.
Senator, let me just start by thanking you for doing this event and for your remarks, but really thanking you for a lifetime of championship for working people. You really are one of our heroes here at CAP and we view you as a strong partner and it’s great that you’re here. I know you don’t have much time, let me dive right into it. Would you describe, Senator, really two different tax systems. One for the very wealthy, and people whose income really comes from wealth, and the other that applies to working people. And it’s not just teachers and truck drivers, but doctors and accountants, anybody who’s making their living through wages as opposed to wealth is affected by this. So what are the big things we need to do about this? There’s a lot of proposals on the table to raise the capital gains rate, to step up basis, et cetera. What do you think the most important ways that we can rebalance this tax system to give more fairness to it?
Senator Sherrod Brown:
Well, you start with making permanent, John, the Child Tax Credit and the Earned Income Tax Credit. The most important thing is to put money … The American Recovery Plan was putting shots in people’s arms and kids back in school and money in people’s pockets and workers back in their jobs. So it all focuses on the dignity of work and all focuses on that. But the most important thing is putting money in the pockets of working class families, so that they know government’s on their side. I think we look at a whole host of other things, on capital gains, on the estate tax, when raising the … On understanding who has skated free, that far too many wealthy people have paid little or no tax. You said it exactly right, if you’re a wage earner and you file a W2, they know how much money you make and you pay.
It’s not as steeply graduated income tax, like it used to be when you and I were kids, John, but it’s a graduated income tax. It’s the right way to do that. But I think it starts out … And we also, to pay for infrastructure, to pay for the Families Act, all this, one of the other things we do … I was talking with former committee chair, Henry Waxman, whom John knows pretty well, today about drug prices. That if we have Medicare negotiate drug prices on behalf of Medicare beneficiaries, it will save billions and billions of dollars. That money could be plowed back end to help pay for some of the provisions in the Families Act, in the infrastructure bill. And what we’re going to do in the future is we make the Child Tax Credit permanent.
Yeah, well, Lily talked about this ProPublica report, which talked about the fact that these billionaires are paying little or no taxes. There’s also a problem on the corporate side, of course, 55 large corporations that paid no taxes in recent years. The corporate tax rate for the largest corporations is around 8%, as a result, really, of the 2017 Trump tax cuts. In terms of going after those questions, one of the proposals that the president’s proposed is to raise the corporate tax rate back up to 28%. Secretary Yellen’s also really championed proposals to ensure that there’s fairness in international taxation. What do you think the chance is that the Senate can actually pass those this year?
Senator Sherrod Brown:
Well, I think we’re going to figure out, I don’t know if it’ll get up to 28, I think it should be significantly higher. As you pointed out, John, it was brought from 35 down to 21 with the Trump tax giveaway. To think about where we start this debate, 70% of the benefits from the Trump tax cut, and keep in mind, they didn’t care about the budget deficit in those days, as you know. Originally, the beginning of Trump’s term, back-end Lily’s magical year of 2016 … Well the year after, I guess, 2017. The beginning of his term, they talked about a trillion dollar infrastructure plan. Then one day they just decided, well, we don’t want to do a trillion for infrastructure. We’ll do a trillion in tax cuts and it ended up being half, again, bigger than that. And 70% of those tax cuts went to the wealthiest 1% of this country. So when we talk about raising corporate taxes, or taxes on the wealthy, start with that understanding. We just need to close that gap of the tax giveaway of five years ago. Not even four years ago.
We’re not even really talking about increasing taxes because it’s still not as much as it was back then. I think there are other things we can do to make it fair. So I think you start with that. And most or all of my democratic colleagues are willing to claw back much of that corporate tax. I don’t know that we’ll get to 28. I think there’s some in our caucus who are more conservative than you and I are, John. But I think we’ll make a run at it, we will close the tax gap. I was talking to the Commissioner of the IRS, long conversation late Friday afternoon, last week, about Child Tax Credit. About getting access to the portal, the non-filer portal on IRS for Child Tax Credit. We’re also talking about the tax gap and he says, “It’s more than a trillion dollar tax gap, what is owed and what is collected.” So we have a lot of avenues to collect a lot of corporate tax, and wealthy people dollars, that simply haven’t been carrying their fair share in the last 10, 20, 50 years, whatever.
I saw that Senator Manchin said today that he thought we needed to invest in human infrastructure. And I think he was talking about the Child Tax Credit and things like that. And that we had to unwind the Trump tax cuts, which were overweighted. Which leads me to a question, which is, we’re all following this bi-partisan infrastructure conversation that’s going on. It’s clear that Republicans don’t want to pay for that with raising taxes on corporations. They want to put the burden, really, on consumers and workers. But if this comes about, and there’s some good investments in it, but if it comes about, I think the Republicans are betting it probably closes the door on reconciliation if they give a little more on infrastructure. Democrats are betting that it opens the door. What do you think … What’s going to happen? I know people are really on pins and needles trying to figure out, if there’s a bipartisan infrastructure bill, can we ever get to a reconciliation bill where Democrats have shown a willingness to create some fairness and make the right kind of investments in clean energy and [crosstalk 00:16:29].
Senator Sherrod Brown:
The bi-partisan [crosstalk 00:16:30] stand in the way of going big, period. Let me illustrate it this way. You know Biden pretty well, John. And I served with him a couple of years when he was pretty much leaving the Senate, during those two years running for president and vice-president. Back a decade plus ago. But I’ve traveled with him a lot, [inaudible 00:16:48] and all, and I think when he first decided to run for president this time, he thought he was going to restore America to a pre-Trump normalcy. Then the pandemic hit, and the great revealer of wealth inequality, structural racism, and our moral obligations on climate. Biden understands that he can be, without the ego, he doesn’t have the ego the size of many presidents, that he needs to be LBJ and FDR. He needs to go big.
And there is no way that any democratic steps, whatever the bipartisan agreement is, if in fact there is one, with [inaudible 00:17:31], because the Republicans want to pay for a gas tax, we want to use corporate taxes. And making the rich pay a little more, or a lot more, but that can not stand in the way. We go big. This is our first chance in years we’ve had to go really big one on dealing with wealth inequality and structural racism. On climate, on giving opportunity to lower income families. I did a round table in my Banking, Housing Committee I chair now on the dignity of work. And there was a woman from Southern West Virginia, from Joe Manchin’s state. And she said something along the lines of, “The words worker and poor shouldn’t be in the same sentence. And working and poor shouldn’t be in the same sentence.”
And she struck me. I didn’t know her life story, she looked to be, I assume, in her 50s, maybe 60s. And she struck me as somebody that’s struggled all her life in low wage jobs. And she’s referred to as working poor and people that work as hard as she’s worked her whole life should not be poor. And that’s the star to which we aim, at which we aim always in the work we do. That we should honor people that work hard, should be able to get and should have a decent life, a decent life expectancy, a decent quality of life. And our country’s not doing that now. And this is the chance, in 2021, with this Democratic president, a progressive president. With this Democratic Senate, a mostly progressive Senate and a progressive Speaker of the House, that we deliver.
Well, we know that the Republicans, from what Mitch McConnell and others have said, aren’t going to give you any help. So you sound pretty optimistic that we’re going to get to that reconciliation bill. Either in two steps or one step, but we’re going to get there. And we’re going to get there this year.
Senator Sherrod Brown:
Yeah, yeah, we have to.
While I completely agree with that. Let me ask you one last question, I know you have to go vote, which is, President Biden … You alluded to this, President Biden is proposing an additional $80 billion over 10 years for IRS enforcement, which raises 320 billion, so you get a net of $240 billion. Is your appetite for that, and do you think amongst Democrats in the Hill, to provide those resources to go after those tax cheats who are really evading taxes? Particularly at the top?
Senator Sherrod Brown:
Absolutely. I don’t think there’s a Democrat in the Senate that doesn’t think we should … I mean, we’ve seen the IRS budget go like this because Republicans have insisted that the IRS have fewer dollars to audit. While they’ve said let’s audit more CTC and EITC, they relatively rarely find cheaters there. There might be somebody because they’re not always as sophisticated as having corporate lawyers and accountants that don’t fill their tax and turns out exactly correctly. So they might recoup a few dollars from the IRS. They’re always pushing back on any expenditures to do what we really need to do on …
And it’s complicated. I mean, auditing a hedge fund takes great skill and great experience. And IRS doesn’t have the employees with the longterm, professional experience that we need. Not enough of them. So it’s going to be a process, but we’ve got to infuse them with more dollars to do what they need to do. That’ll be part of the reconciliation bill, I’m almost certain. And the Republicans are going to whine about that because they’re always there about protecting their rich friends and their corporate interests. But let the whining begin for that because that’s clearly the right thing to do.
Senator, I know you got to go vote, we’re hearing from your staff, but I just want to say thank you again for doing this event. But for your championship, keep fighting, we’re behind you. And we just got to get this done and, as you know, it’s got to get done in the next couple of months. So we’re in there with you.
Senator Sherrod Brown:
Thank you. Lily, thank you. And thanks to the Center for American Progress, your work is … We look to you, I remember when I was working against the Iraq war back in, whatever year that was, early part of this century. And I was in the House and I looked at what you were putting together, John, there and it made a huge difference when Democrats weren’t in the majority. And now we are and you help us deliver big. So thank you everybody.
Thanks, Senator. I remember talking to Jack Murtha about that, just before he went and really turned the tide.
Pitchfork Economics is produced by Civic Ventures. If you like the show, make sure to subscribe, rate, and review us wherever you get your podcasts. Find us on Twitter and Facebook at Civic Action and Nick Hanauer, follow our writing on Medium at Civic Skunk Works, and peek behind the podcast scenes on Instagram at Pitchfork Economics. As always, from our team at Civic Ventures, thanks for listening. See you next week.