Eight Ways to Fix the Tax Code to Improve Health Outcomes

By now everyone knows that the wealthy keep accumulating money while the lower classes keep losing. Recently, I saw a statistic that the wealthiest 1% (2000) gained $29 trillion in wealth since 1989 while the bottom 50% lost $900 billion.

In 2018 the tax rate for the richest 400 families in the United States was 23% versus 24.2% paid by the bottom half.

This can be dealt with, but obviously everyone is afraid to do it. Political candidates would lose their big funders. A small handful of Americans (.001 %) control more than 40 percent of election contributions.

A regressive tax is taxation where rates remain the same regardless of income level. The regressive taxes make the situation much worse. Because very often they tax necessities that we all need – sales tax is a perfect example.

In the US the taxes are not paid fairly. The states with the most regressive tax structure leave the lowest income people paying a higher percentage of their income towards taxes.  The lower one’s income, the higher one’s overall tax rate. The nationwide average state and local tax rate is 11.4 % for the 20% of individuals that make up the lowest income group, 9.9 % for the middle 20%, and 7.4% for the top 1%.

Below are some steps that would lead to less inequality in our tax structure:

1. Social Security. When you hit $133,000 in income, the Federal government stops taking out social security for any earnings above that. I feel people and corporations should pay in again when a person’s income reaches $250,000 and stop at $3,000,000. That way, the social security fund will grow and perpetuate itself and allow for fairer distribution of pay outs for lower income earners.
2. Completely stop 1031 Exchanges that allow you to avoid taxes if you sell a property within a certain time and buy another one—this benefit only affects the wealthy. Thankfully, only real estate is subject to 1031 exchanges; artwork and airplanes are no longer eligible. One independent study indicates that lost treasury revenues from 1031 exchanges, range from $200 million to $3 billion depending on the year.
3. Currently under new tax law, accelerated depreciation allows for planes and other assets with tax lives of 15 years or less to be written off 100% in the first year. At least this should be slowed down.
4. Depreciation: The depreciation tax shield is another way to minimize taxable income. Because assets lose value over time, they can be written off as expenses (depreciation). If you want, you can legally say that these assets lose more value in the early years, allowing you to pay even less up front (accelerated depreciation). The depreciation rate is way too generous. It should be scaled back. Accelerated depreciation should be stopped or phased out.
5. Annual Gift Tax-Right: Now, an individual can literally gift $15,000 to as many people as they want. For married couples the amount is $30,000. I have 6 children, 15 grandchildren and 6 great-grandchildren, and my wife and I can gift $30,000 annually to each of them.  The recipients do not pay taxes on this money. This should be capped at $150,000 total per couple. The limit on the estate tax should be significantly lowered. Again, this only benefits the wealthy.
6. Tax havens and shelters: Corporate tax dodgers are a huge part of the problem. There’s no limit to the legal ways that billion-dollar companies get out of paying their share. They have set up so many systems to avoid paying taxes with foreign operations that some Fortune 500 have managed to pay absolutely no federal taxes at all. This is a very big subject and I don’t have enough knowledge to go into that here, except to say that this problem needs to be dealt with if we are going to have any chance at a fair and balanced tax system in this country. For example, Amazon nearly doubled their profits to $11.2 billion in 2018 and paid no money in Federal income taxes.
7. Private foundations, endowments, public charities, and donor advised funds should be required to spend 7% of their assets annually. This would be a 40% increase on private foundations which is fair. Now, it leaves a ton of money on the sidelines that could be helping people that need it.
8. Grantor trusts should be eliminated or phased out.

Lastly, here is a Dipsy Dooser.  In Georgia, The HOPE Program (Helping Outstanding Pupils Educationally) rewards high-achieving students with financial assistance for public and private colleges and universities and is entirely funded by the revenue of the Georgia lottery system. Who plays the lottery? Those that can least afford to do so. According to the Georgia Statewide Lottery Survey:

• An individual without a high school degree or GED is more than four times as likely to be an active lottery player as an individual who has an education above the high school level.
• A high school graduate is two and a half times more likely than someone who has an education above the high school level to be an active lottery player.
• Blacks are three times more likely than non-blacks to be active lottery players.

By implementing simple changes to the tax code, the very wealthy will have their percentage of taxation more in line with the rest of the citizens. It would be one way to stop the tax burden for falling disproportionally on lower income people. High income inequality has negative consequences for the political stability of a country and long-term economic growth.  Policies that improve the re-distributive role of the tax system, may help avoid the negative effects of income inequality in the US.  Countries that have more lower income disparities, have much better health outcomes.

Barry Segal

Founder

Barry started Focus Autism in 2009 to advocate for vulnerable children who were more susceptible to developing chronic illnesses after being exposed to environmental toxins and other immunological triggers. In 2015, Focus for Health expanded its mission to include addressing how social determinants of health increase vulnerability to disease and ending child sex abuse.