The Triumph of Injustice | Emmanuel Saez

Summary of: The Triumph of Injustice: How the Rich Dodge Taxes and How to Make Them Pay
By: Emmanuel Saez

Introduction

Welcome to the enlightening journey of ‘The Triumph of Injustice: How the Rich Dodge Taxes and How to Make Them Pay’. In this eye-opening book, renowned economists Emmanuel Saez and Gabriel Zucman critically examine the American tax system and its implications on wealth inequality. Unravel the intricate web of tax avoidance strategies devised by the wealthiest citizens, and explore the diminishing impact of corporate taxes on national income. With a wealth of data-driven insights, the authors attribute the decline in real minimum wage value and life expectancy to flat tax rates and regressive state taxes. This summary will guide you through the facts and figures, as well as the compelling case made by Saez and Zucman for a fairer, progressive tax system.

American Tax System Reformation

Emmanuel Saez and Gabriel Zucman argue in their book that the US needs a more effective and progressive tax system to sustain free market capitalism. Their work provides data that proves the rich get richer if taxes do not come out of their capital gains. Their thorough analysis might challenge readers’ preconceived ideas on capitalism, inequality, and taxation. The Guardian calls it a “bracing and brave formulation of a radical new approach to public funding,” while David Leonhardt of The New York Times claims it’s “the most important book on government policy that I’ve read in a long time.”

US Income Inequality

Saez and Zucman’s “The Triumph of Injustice” presents a stark picture of the state of economic inequality in the United States. The authors use a striking statistic that shows the increase in income share for the top 1% and the decrease for the bottom 50%. They also expose the fall of the US minimum wage and payroll taxes for minimum-wage earners, showing how more of the poor’s consumption is taxed than that of the rich. In addition, they highlight how the US life expectancy is poorer than other wealthy countries. Saez and Zucman conclude that extreme inequality harms the community, and unfettered markets lead to a concentration of wealth that threatens our democratic and meritocratic ideals. The authors point to figures like Warren Buffet, who pays a lower marginal tax rate compared to his salaried secretary despite owning a corporate empire designed to reinvest profits rather than paying dividends. Saez and Zucman offer much-needed insight into the reasons behind unprecedented income inequality in America.

The Power of Corporate Tax

In their book, Saez and Zucman reveal that the richest individuals earn most of their income from owning assets, businesses, or shares in companies. This makes corporate tax a minimum tax on the affluent as it takes tax revenues out of wealth accumulation. The authors argue that corporate taxation is essential because the wealthy reinvest most of their financial gains in their companies. By doing so, they impede wealth redistribution and perpetuate social inequality. Therefore, taxing corporations is a positive step in breaking the cycle and leveling the playing field.

The Truth About US Taxes

Saez and Zucman’s research unveils shocking truths about the US tax system. They reveal that the highest earners pay a lower percentage rate than the middle class. Additionally, they detail how society’s political ideology and priorities have created a favorable environment for tax dodging.

According to Saez and Zucman’s investigative report on taxes in the United States, taxes for Americans are equivalent to 28% of GDP, and everyone pays around 25% to 30% of their incomes in taxes. This suggests that, in reality, the US tax system is roughly flat and not progressive as some may think. Surprisingly, the top 1% of earners pay only slightly more than the middle class at 32%, while the top 0.001%, or one in every 100,000 people, pays only 25%.

Saez and Zucman examine the history of the US tax system and find that it has moved away from progressive taxes, which were once believed to deal with an “undemocratic concentration” of wealth. During the post-World War II decades, corporate taxes took more money from the rich, while personal income taxes were high for a tiny minority. However, this has changed significantly, as corporate taxes today only contribute a mere 1% to national income, down from 4%-5% in the late 1950s and the 1960s.

The authors reveal that corporations and individuals now dodge taxes on a massive scale, citing research that 60% of the profits made by US multinationals abroad were booked in low-tax countries in 2019. Such companies move paper profits to branches or shell companies in low- or zero-tax countries, costing taxpayers billions of dollars. This is compounded by the fact that Congress has cut the Internal Revenue Service’s budget by 20% since 2010, while the tax-avoidance industry is now worth billions.

Saez and Zucman conclude that American political culture and signals from Washington, DC have contributed to a favorable environment for tax dodging, with a focus on maximizing shareholder returns overshadowing national interest or moral obligation. As shocking as it sounds, individuals need only obey the minimum legal requirements, and the neoliberal duty to maximize shareholder returns has cast a shadow over the country’s moral obligations.

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