In the American Rescue Plan, the Ways and Means Committee provided the backbone of a critical relief package that helped Americans weather the pandemic. Now, as Congress prepares to work with the Biden Administration to build on the progress we have made, we also need to consider how our tax system is impacting our efforts to foster a fair and inclusive economic recovery-and level the playing field for all taxpayers going forward.
Today, the Committee will examine the way the tax system works differently for the very well off than it does for the middle class. For a generation, the bulk of the gains in our economy have been concentrated in the wealthiest Americans. Middle class families have seen real incomes stagnate while those at the top grow richer.
Our progressive tax system is supposed to counterbalance economic inequality, so that those who have been more fortunate pay a little bit more toward the common good. Unfortunately, the tax system we have hasn’t always lived up to that ideal. A tax system that favors financial assets and dynasty trusts over working families won’t support the investment we need to build a more prosperous future. Tax advantages that favor the wealthy lead to wasteful tax avoidance, which is neither productive nor fair.
As we consider some of the advantages that the tax code provides the wealthy-by taxing wealth more generously than work, and deferring or eliminating tax entirely-we also need to keep in mind how the tax system affects working small business and farm owners. A fair tax system should also preserve these important parts of our communities. I believe we can do a better job of taxing financial wealth while preserving our small businesses and family farms. I hope my colleagues on the Committee will join me in working toward that goal.
In addition to the tax advantages the code grants high income and wealthy individuals, we also know that the well off are able to plan to avoid taxes, and in some cases evade tax through not properly reporting all their income and overstating their deductible expenses. Working Americans have almost all their income and their most important deductions reported to the IRS while taxpayers at the top are too often on the honor system. Americans will feel more confident paying their taxes if they know that everyone else is paying their fair share, and that means both tax laws that are fair on paper, but also fairly enforced. This is an important piece of the picture, and we can’t lose sight of it. Although not the subject of today’s hearing, IRS enforcement will be closely examined by this subcommittee, in conjunction with Mr. Pascrell’s Oversight Subcommittee, in the month of June.
I hope this hearing will be the beginning of an important discussion among all the Committee’s members on how to build a durable tax system that treats all Americans fairly, so that we have the resources to invest in our priorities this year and in the future.
And with that I will recognize the Ranking Member, Mr. Smith of Nebraska, for the purposes of an opening statement.
