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Reality Check: Why It Really Is Time To Tax The Rich

John Avlon points out the wealth gap between America's richest and poorer families more than doubled between 1989 and 2016.
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John Avlon did a Reality Check segment on the message of AOC's dress at the Met gala.

"Tax the rich. That's what it said on AOC's dress at the Met gala, firing up the outrage industrial complex with accusations of hypocrisy. Was it the latest in performance art or even a possible ethics violation? Here's what's not debatable. The dress got more mainstream attention put forward by House Democrats last week to raise taxes on the rich. Even on some news, coverage was nearly neck and neck," he said.

"Don't get distracted by the scandal du jour. Pay attention to substance. Even if it's an opening bid with a lot of obstacles ahead, this is a very big deal. It would raise $2.1 trillion in new revenue from the wealthiest Americans in 10 years while making a trillion in cuts, some would benefit lower income families, like making the child tax credit permanent. The balance is put forward for domestic spending that President Biden is betting will rebuild the middle class.

"Don't forget the American Revolution began as a tax protest. Even when it's directed at the top 1%, talk of raising taxes is always going to provoke serious agita. Because when you look under the hood, you will see this much-hyped tax hike is in most cases either a return to or reduction from where rates were under Obama and Clinton. We saw record stock market growth under their watches. So not exactly benchmarks for socialism. For example, House Democrats are proposing that the top rate be changed to 39.6% for individuals making $400,000 and families making $450K, which is what it was before the Trump tax cut -- and far less than the top rate in decades after the second World War.

"Or how about the corporate tax rate? Democrats are proposing it be raised from 21 to to 26.5%, but that is far below the 35% rate from just a few years ago. Few companies actually pay the full amount. Some pay zero. So closing loopholes there could raise more revenue. 25% for top earners is well below what Biden originally proposed. They removed some really bad ideas, like making families pay a tax on the increased value of a home they inherit. There's going to be a lot more negotiation on the road to reconciliation, even if they scrap plans to raise more revenue from the increased enforcement of existing tax law. Some will complain this doesn't go far enough. some Republicans will no doubt scream socialism.

"But here's the bigger backdrop. The wealth gap between America's richest and poorer families more than doubled between 1989 and 2016. Middle income grew at a slower rate than upper-tier incomes. And get this: In 2018, after the Trump tax cuts, the 400 wealthiest Americans paid a lower effective tax rate than working class Americans for the first time in our history. Pan out, and the picture doesn't get much better. In 2019, .09% made an average of $39,000. the top 5% averaged $320,000. But the top .1% averaged nearly $2.9 million. Jared Kushner and Ivanka Trump declared income of at least $36 million while working in the White House.

"So there's a very big difference between the working wealthy and the super rich that sticking 'Tax The Rich' on a dress doesn't quite capture. That's why House Democrats have also proposed a 3% surtax on people making more than $5 million a year. What's clear is the past few decades we have seen the middle of America's economy hollowed out in ways that help increase our polarization, which can lead to a crisis in confidence in capitalism.

"And that's why you will hear Biden talk a lot about the middle class. Look past the slogans and pay attention to the real policies. Because that's where rhetoric meets reality. And that's your reality check."

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