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ron johnson
Ron Johnson Is Working Tirelessly to Protect the Super-Rich From Paying Their Fair Share
While purporting to be concerned about income inequality, Johnson advocates for proposals obviously intended to benefit his rich benefactors and, worse yet, himself.
Oct 11, 2024
If you were a rich Wisconsinite striving to get even richer and you had little regard for intellectual honesty or the well-being of your fellow citizens, you would agree with Sen. Ron Johnson’s remarks at last month’s Senate Finance Committee hearing.
Otherwise, you’d find the senator’s views troublesome, to say the least.
I was a witness at that hearing. Johnson asked me to agree with him that having both an income tax and an estate tax is double taxation. As politely as I could, I pointed out that the income tax and the estate tax are two different taxes. The senator’s argument is no different than saying it is double taxation if an average American, after paying tax on her wages, pays federal excise tax at the pump when she purchases gas.
Unless and until Johnson’s face replaces Roosevelt’s at Mt. Rushmore, I’ll go out on a limb and say we should stick with the tax structure Roosevelt advocated.
Johnson undoubtedly knows better. America has had both an estate tax and an income tax for over a century now. They’re two different taxes. One is an income tax; the other is an excise tax on the transfer of substantial wealth. The specific purpose of the estate tax was to limit the size of America’s largest dynastic fortunes, lest we slip into an aristocracy. The lead advocate for the estate tax, President Teddy Roosevelt, recognized the necessity for both taxes: “The really swollen fortune, by the mere fact of its size,” Roosevelt observed, “acquires qualities which differentiate it in kind as well as in degree from what is possessed by men of relatively small means.” Therefore, Roosevelt, a Republican like Johnson, advocated for both a “graduated income tax on big fortunes,” and “a graduated inheritance tax on big fortunes, properly safeguarded against evasion, and increasing rapidly in amount with the size of the estate.”
At the hearing, Johnson was speaking in support of keeping one of the worst loopholes in the tax code, a provision commonly known as stepped-up basis. It allows the untaxed gains on the investment assets of mega-millionaires and billionaires to escape income taxation entirely, as long as they hold those assets until death. Jeff Bezos, for example, would avoid income tax on over $100 billion of gain on his Amazon shares were he to hold those shares until his death. And if ultra-rich Americans ever need cash, they don’t need to sell highly appreciated assets. Instead, they can borrow against the assets. It’s a strategy known as buy-borrow-die.
Johnson’s true goal isn’t really protecting the ultra-rich from double taxation, though. He actually wants to protect them from any taxation. That’s what the Death Tax Repeal Act of 2023, a bill Johnson and 41 other Republican senators have sponsored, would do. If that were to become law, Mr. Bezos, or any other billionaire, could pass his billions to his inheritors free of both estate tax and income tax on all those previously untaxed gains.
Unless and until Johnson’s face replaces Roosevelt’s at Mt. Rushmore, I’ll go out on a limb and say we should stick with the tax structure Roosevelt advocated. And that requires closing the stepped-up basis loophole.
At the hearing, Johnson did not limit his shilling for the ultra-rich to the stepped-up basis issue. While purporting to be concerned about income inequality, Johnson advocated for proposals obviously intended to benefit his rich benefactors and, worse yet, himself. Were it up to him, for example, our tax law would “index out” inflationary gains. Here’s how that would work for Johnson and his fellow real estate moguls: Say Johnson purchased a property for $10 million with $2 million in cash and an $8 million loan, using the property’s rental income to make the loan payments. Now, say inflation ran at 4% for 10 years and Johnson’s property kept pace. Under his plan, he’d be treated as if he paid $14 million for the property. And if he then sold the property for its $14 million value? He’d have no income tax to pay, but after paying off the loan, he’d have a $4 million profit. Yes, $800,000 of that profit would be attributable to inflation, but the other $3.2 million would be real profit, and it would escape tax entirely if Johnson has his way.
Johnson’s efforts to “address inequality”—yes, he really presented it this way at the hearing—aren’t limited to opposing stepped-up basis reform and advocating for indexing for inflation. He also insists that he and his rich patrons not be taxed on their massive investment gains until they sell assets so they have the “wherewithal to pay.” That would allow the country’s ultra-rich to continue to benefit from the tax-free compounding of their investment gains using the buy-borrow-die strategy. When you do the math, even when the ultra-rich sell long-held investments before they die and pay tax on their gains, the effective annual rate of tax on the growth in their wealth can be less than 5%. With Johnson’s plan to “index out” inflation added to his staunch support of buy-borrow die, that effective rate would be even lower.
There’s no need to guess about whether Johnson believes he’s advocating for good tax policy or is simply carrying water for his billionaire backers (and himself). The record is clear. In 2017, Johnson pushed hard for the so-called “pass-through deduction,” which allows owners of limited liability companies and subchapter S corporations to pay a 20% lower rate of tax on their income. He even threatened to withhold his vote for former President Donald Trump’s tax package unless the pass-through deduction was increased. In 2018, according to reporting by ProPublica, the pass-through deduction generated tax deductions of over $117 million for Dick and Liz Uihlein, the owners of Uline, and over $97 million for Diane Hendricks, the owner of ABC Supply Co. In 2022, according to the Milwaukee Journal Sentinel, Hendricks and the Uihleins contributed at least $22.5 million to Wisconsin Truth PAC, a Johnson-supporting super PAC which spent $24 million on ads attacking Johnson’s 2022 opponent, Mandela Barnes.
Those massive contributions were entirely rational, in a depressing way that reeks of corruption. In 2018 alone, Hendricks and the Uihleins saved just under $80 million in tax as a result of Johnson’s handiwork. His efforts to continue the pass-through deduction past its scheduled 2025 expiration date could net them about $1 billion over the next decade. That $22.5 million they spent on Johson’s 2022 senate campaign may be categorized as a campaign contribution. But when $22.5 million has the potential to enrich you to the tune of $1 billion, it smells a lot more like an investment. And a highly profitable one; the kind only billionaires experience.
With Washington filled with politicians like Ron Johnson, we need more patriotic millionaires. A lot more. To paraphrase our Vice Chair, Stephen Prince, we need more wealthy Americans to step up and say that while they like being rich, they recognize that our tax system has been rigged in their favor for far too long. And we need more politicians fighting to unrig our tax system, not rig it further. We’ll never change the mindset of Ron Johnson and his ilk. The only way to fix this mess is to elect politicians who will outvote them.
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Employee Ownership: A Surprisingly Bipartisan Solution to Inequality
Broad-based employee ownership is one approach to economic opportunity that has wide political support, a demonstrated record of success, and great untapped potential.
Jan 28, 2024
A recent Oxfam report found that “the combined fortunes of the world’s five richest men have more than doubled to $869 billion since 2020, while 5 billion people have been made poorer.” The report makes a number of recommendations to help address the problem of wealth insecurity, one of which is supporting employee ownership.
That may seem like a stretch in today’s polarized political climate, but, in fact, employee ownership has the support in Congress of Sens. Bernie Sanders (I-Vt.), Tommy Tuberville (R-Ala.), Elizabeth Warren (D-Mass.), Ron Johnson (R-Wis.), and just about everyone in between. In fact, over the last 46 years, employee ownership has consistently been supported by virtually all members of both parties through a variety of tax and financial incentives.
There are 14 million employees in the most common form of employee ownership in the U.S., the Employee Stock Ownership Plan (ESOP). The average account value for these plans is $136,000 per employee, and much more for longer-tenured workers. ESOP-owned companies grow faster than their competition, lay people off at one-third to one-fifth the rate, and have far lower voluntary turnover.
By contrast, 50% of the private sector workforce is in no retirement plan at all, and half the households cannot put their hands on $1,000 in an emergency. While most ESOPs are in companies with 20-100 employees, the 100 largest ESOP-owned companies employ close to 700,000 people and include some of the largest companies in their fields.
It is not difficult to persuade legislators that this is a good idea, but there needs to be a real push to make people see it as an important idea.
There is a lot of conversation about income inequality, but this is only half the story. While real wages have been largely stagnant since the 1970s, returns on capital have been impressive. The Dow had only three digits in the 1970s and has five today. If more workers were owners, more families could afford to retire, to buy a home, to send their kids to college, and do all the other things only wealth can provide.
Broad-based employee ownership is one approach to economic opportunity that has wide political support, a demonstrated record of success, and great untapped potential. Employee-owned companies perform better, and their employees are much more economically secure. You would think pundits and politicians would be shouting from the rooftops about an idea that both works to improve people’s lives in meaningful ways and is politically feasible. But almost no one does.
Employee ownership can involve employees buying stock, but most broad-based employee ownership in the U.S. allows working people to become owners without their having to cough up scarce dollars to do so. ESOPs, the major form of employee ownership, are funded by the company, almost always as an additional employee benefit. Over 90% of these plans are in closely held companies, where they are usually used as a means to provide for business transition, creating an ideal scenario for the wave of retiring baby boomer business owners who want to manage a transition in a way that preserves their business legacy. Congress has granted these plans and owners selling them significant tax benefits.
It is far past time for people to start talking about this. While Congress has provided generous tax support for ESOPs, there is more that needs to be done, especially in helping make more financing available and supporting outreach efforts to educate business owners about why ESOPs can be a good idea for their companies. The Worker Ownership Readiness and Knowledge Act (the “WORK Act”), for instance, passed in 2022 and would fund state employee ownership outreach programs, but it will need funding in the next congressional budget to become effective. The Employee Equity Investment Act would provide government-backed financing for companies to use ESOPs to buy out existing owners of closely held businesses. It has bipartisan support. State programs have been enacted in a number of states, but more are needed.
It is not difficult to persuade legislators that this is a good idea, but there needs to be a real push to make people see it as an important idea. That can happen if more voices are raised to support it.
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Sen. Ron Johnson Argues Against Rich Paying Fair Share to Ensure Social Security's Survival
The Wisconsin Republican millionaire accused working-class Americans of "getting a lot more in return" from the key social program than rich people who pay disproportionately less into its coffers.
Jul 12, 2023
U.S. Sen. Ron Johnson came under fire Wednesday after the multimillionaire Wisconsin Republican asserted during a Senate hearing that Social Security—an economic lifeline for tens of millions of Americans who paid into the system throughout their working lives—unfairly takes from wealthier people to support lower-income retirees.
Speaking during the Senate Budget Committee hearing—entitled Protecting Social Security for All: Making the Wealthy Pay Their Fair Share—Johnson said that his Wisconsin constituents "have a basic misconception about Social Security."
Johnson—one of the wealthiest U.S. senators, according to the watchdog OpenSecrets—derided Social Security, a key New Deal program, as a "nanny state" scheme enacted because the government doesn't trust Americans to save for retirement on their own.
"Most people think, 'Well, that's my money,' and, in fact, part of it is," the senator continued. "If you're in a low-income group, you're getting a lot more in return than you invested in... If you're in the high-income, you're not getting what you paid in."
Patient advocate and cancer survivor Peter Morley tweeted Wednesday that "Sen. Ron Johnson is a LIAR and it was clear from today's hearing that he is a defender of the rich and not for the people!"
Johnson previously called Social Security a "Ponzi scheme" in one of many attacks on the program upon which around 66 million Americans rely.
Further arguing during Wednesday's hearing that Social Security was not meant to be a "general welfare system," Johnson turned to Institute on Taxation and Economic Policy (ITEP) executive director Amy Hanauer—who testified that "our tax system raises far too little from those with the most"—to ask what he called "a very simple question."
"Out of every $1 of income that any American makes," he queried, "how much should be the maximum amount the government takes out in total?"
"I think we should think about the kind of country we want to have," Hanauer began to reply before Johnson interrupted her to demand an answer as "a percent."
"You know, we had 400 billionaires who paid less than an 8% tax rate, so more than that," she asserted. "It strikes me that in a society where the wealthiest are getting more and more of our income, they can afford to chip in more to maintain the systems that enabled them to build that wealth in the first place."
Senate Budget Committee Chair Sheldon Whitehouse (D-R.I.) followed Hanauer's response by opining that "it would make a very big difference to me in how much should be taxed on a dollar of income whether it was the first dollar of income of an individual or their billionth dollar of income."
On Tuesday, the Social Security Administration's Office of the Chief Actuary published an analysis showing how Democrats' Medicare and Social Security Fair Share Act could extend the social programs' solvency for generations by increasing taxes on incomes over $400,000.
Another bill introduced earlier this year by Sens. Bernie Sanders (I-Vt.) and Elizabeth Warren (D-Mass.) and Reps. Jan Schakowsky (D-Ill.) and Val Hoyle (D-Ore.) would boost monthly Social Security benefits by at least $200, prolonging the program's solvency for decades by lifting the cap on the maximum income subject to Social Security payroll tax.
Meanwhile, House Speaker Kevin McCarthy (R-Calif.) has announced the creation of a fiscal commission tasked with finding ways to reduce the national debt, warning last month that he was "going to make some people uncomfortable" by looking at cuts to Social Security and Medicare.
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