The extreme concentration of wealth, the millionaires point out (or admit), was not inevitable. Payne writes that “a small group of very wealthy people have spent a huge amount of money over a very long period of time influencing a political system, making tax laws to ensure that the economy delivers most of their profits.” This system means that every political party in power is boom or bankrupt, recession or manic bubble, the extremely rich lock up their eternal fortune. The Patriotic Millionaires show how close the rich are to the political process and how easy it is for them to pick up the phone and speak directly to senators.
To understand how tax law directs money to a small group, we need to know that taxes are not primarily a tool to generate revenue for government spending – the federal government can and will spend regardless of tax collection, Payne points out. Taxes are, among other things, an instrument for limiting income and setting norms of behavior. The way we tax various activities is in line with our priorities as a society. For example, we tax tobacco, alcohol, and gambling (“sin taxes,” as they are called), but most of the time we don’t tax food. New Jersey has a higher property tax if you have a pool. Is there a strict econometric logic? No. Taxes exist at the interface between business, politics and ethics.
Currently, our tax law is designed to concentrate wealth in a few, by lightly taxing the sources of wealth. The most prominent example is the capital gains tax, which with a top rate of 20 percent is significantly lower than the income tax. Capital gains are the income a person receives from investments. As a practical example, if you made $ 80,000 in annual income from your job in New York state, you’d pay 26 percent of that in taxes while sitting around year-round making $ 80,000 in capital income wouldn’t pay taxes because the Government does not tax the first $ 80,000 in investment income. After that amount, you would only pay up to 20 percent tax, a saving that turns into excess wealth. The rich invest much more of their wealth, and this is why the poorest 10 percent of Americans, economists Zucman and Saez found, pay 10 cents on the dollar in taxes, while the richest 1 or 2 elected officials can pay endlessly over speak of the value of a hard day’s work and the nobility of work, “writes Payne,” but our tax laws are deliberately designed to reward capital income over labor income. “Therefore, someone like Martha can be showered with ever greater wealth without even trying .
The second major way our society is helping the extremely wealthy stay extremely rich, Chuck Collins argues in his book The Wealth Hoarders, is through the abuse of legal entities called trusts, which have two ruinous functions: They enable people to grow huge Passing on bundles of wealth to their families, and they hide the true possession of that wealth, making thorough taxation hopeless. Trusts were formed during the Crusades in England to hold the property of one person (called the settlor) from another person (the trustee) in favor of a third person (the beneficiary). Knights who traveled to the Middle East thinking they could not return for years, if ever returning, would place their land in trusts during their absence until their children were old enough to take control.