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The April 27 Senate Finance Fiscal Responsibility and Economic Growth Subcommittee hearing, "Creating Opportunity Through a Fairer Tax System," discussed the merits of a wealth tax and a minimum tax based on corporate book income, how to narrow the tax gap, and aspects of the tax system that benefit wealth income over wage income.

In an opening statement, Chairman Elizabeth Warren (D-MA) advocated a wealth tax that would impose an annual 2-cent tax on fortunes over $50 million, and the Real Corporate Profits Tax, under which corporations that report profits to their shareholders and the public of more than $100 million would pay 7% of those reported profits. In his opening statement, Ranking Member Bill Cassidy (R-LA) said, "I hope the Biden administration will work with Republicans to get small businesses back on their feet so they can get Americans back to work and keep the economy moving in the right direction. We will not tax our way to prosperity. Small businesses and other employers want to operate under a fair, predictable tax code and they will do the rest."

Witnesses:

• Abigail E. Disney, Ph.D., CEO & Owner, Fork Films, New York, NY
• Cheryl Straughter, Owner, Soleil, Boston, MA
• David Gamage, Professor of Law, Maurer School of Law, Indiana University, Bloomington, IN
• Scott Hodge, President, Tax Foundation, Washington, DC
• Jeff Hoopes, Ph.D., Associate Professor and Scholar of Accounting, Kenan-Flagler Business School, University of North Carolina, Chapel Hill, NC
• Kyle Pomerleau, Resident Fellow, American Enterprise Institute, Washington, DC

Testimony in brief:

• Disney: "Given how far we have let this inequality grow I do not see how we can address this problem other than with a wealth tax. Working people will never, by wages or salary alone, be able to catch up with the folks who have succeeded in putting so much distance between themselves and everyone else. The public needs revenues to restore the commons to its former health, and the wealthy have too much money, plain and simple."
• Straughter: "Asking ultra-millionaires and billionaires to pay a small percent of their massive wealth is a no-brainer."
• Gamage: "It is crucial that the tax system be reformed so that the ultra-wealthy cannot so easily escape paying their fair share."
• Hodge: "Economic research and Tax Foundation modeling indicate there is a negative trade-off between progressive taxes on capital income — such as the wealth tax, minimum book tax on corporate income, and a higher corporate tax rate — and economic growth."
• Hoopes: "My message is that most of the ways in which large corporations and wealthy taxpayers remit taxes at a level the general public may perceive to be 'unfair' are legal methods intentionally legislated by Congress. The income tax in actuality is very broad. However, Congress has legislated many exceptions to its broad ability to collect taxes. If members of Congress seek to raise additional revenue in order to expand the size and scope of government and combat perceptions of fairness, they should start by examining the many items that are currently labeled as 'tax expenditures.'"
• Pomerleau: "Two revenue-raising proposals have gained prominence over the last couple of years: a wealth tax and taxing the book income of corporations. These taxes come with notable downsides. Lawmakers should consider broader-based taxes to finance new government spending and address the federal government's fiscal imbalance. Raising the gas tax or enacting a VMT tax would be a reasonable way to pay for infrastructure. A carbon tax would help address climate change while raising revenue."

Statements and testimony are available here.

For additional details, see the attached Tax Alert.

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Tax fairness hearing