Dems start to get tax-hike anxiety

Democrats hooked up with former President Barack Obama as he campaigned for higher taxes for the rich. And they didn’t blink when the Republicans passed another round of tax cuts in 2017 without a single Democratic vote after years of beating the GOP as a tax and spending party.

But the tax increases proposed by President Joe Biden are of a different kind, even if they focus on people making over $ 400,000 a year. His proposals are far more ambitious than the concessions Obama won after the 2012 election, which raised the top tax rate for high earners.

Many Democrats claim that they are no longer as afraid of the sweeping defeats they suffered when party leaders like Walter Mondale were prone to big tax hikes.

Still, Biden’s proposed tax hikes would come as the economy continues to recover from the coronavirus and Democrats face likely difficult mid-term elections as they increasingly rely on higher-income suburban voters.

“Raising taxes is always a little bit politically risky,” said Caroline Behringer, a Democratic strategist and former senior advisor to the House of Representatives. “Even if surveys show that taxing the rich is popular, I’ll bet some of them just don’t believe it.”

There is a small but growing list of democratic lawmakers who have expressed reservations. And it’s not just the moderates who are desperately trying to cling to their seats that are going public next year – it’s also committee chairs and high-level lawmakers who have no real election threat. Agriculture House Chairman David Scott (D-Ga.) Was the last to speak this week, raising some doubts about the government’s plans to increase taxes on inherited assets.

Biden’s negotiations with Senate Republicans over infrastructure have made it less clear how many Democrats may need taxes to balance their spending agenda. He refined the talks on Wednesday when he offered to fund at least part of his infrastructure package with a minimum 15 percent corporate tax to convince Republicans who refused to accept his proposal to increase the corporate tax rate to 28 percent.

However, the White House said Biden was not giving up his call to hike rates.

Perhaps the biggest problem for the Democrats is that as soon as they push harder to raise taxes, they will find that they have almost no leeway in Congress to pass this latest vision of great government.

All of this has made progressives increasingly impatient with Democrats, who are concerned about the political ramifications of large tax hikes, especially given that voter polls regularly show voters like tax hikes for the rich and corporate.

And if the Democrats don’t seize the moment now, the progressives fear there is no telling when the party will get another chance to tackle income inequality head on and what they see as a tax code that is too focused on wealthy interests.

“That weighs a lot on Democrats,” said Mark Mellman, a Democratic pollster, who argued that public opinion has shifted significantly in recent years towards the party’s “pay your fair share” mindset.

“Views on the Role of Change of Government. Voters could change their minds and decide that the government is doing too much, ”added Mellman. “Democrats are very aware that if it’s not done now, for various reasons, it may never happen.”

Most people watching the situation still believe that the Democrats will pass some serious tax hikes in the coming months, though even the most optimistic Democratic aides say it will be nearly impossible to pass all of the new revenue proposed by Biden.

But all of the current uncertainty surrounding the larger infrastructure talks has only encouraged some Democrats to be more wait-and-see on major tax increases.

Legislators can hardly bet that bipartisan negotiations on roads, bridges and the like will fail and the Democrats will have to go alone. But until then, many Democrats seem happy with what develops in these talks before they venture further into taxes.

Senior Democratic lawmakers are also keen to see the Biden government more fully fleshed out its vision for these tax increases – something that is happening now that the Treasury Department has published the “Green Paper,” the budget document that outlines the government’s tax plans.

“I don’t know which of these proposals is serious as opposed to throwing it all up against the wall and seeing what can stick,” said Senator Bob Menendez (DN.J.), a senior tax writer who argued, that the government has taken a “shotgun approach, a blunderbuss approach where you throw all these things away – these are many different sales changes with many different consequences.”

Menendez and Mark Warner (D-Va.) Are among those concerned about a large proposed increase in the capital gains ratio, while Scott, along with Senator Jon Tester (D-Mont.), Have raised problems with the idea of ​​forcing heirs to pay more on inherited assets – although in that proposal the government promised a spin-off for family businesses.

Senator Joe Manchin (D-W.Va.) Was one of the first to try to narrow Biden’s tax agenda by limiting an increase in the current 21 percent corporate tax rate to around 25 percent – instead of Biden’s preferred 28 percent.

Pretty soon, Democratic leaders and senior tax writers will have to figure out how much tax hikes can actually happen to both the House and Senate, and refine and recalibrate the wide range of Biden’s proposals.

“They will take what we give them,” a senior democratic adviser said of the government.

So far, Senate Finance Chairman Ron Wyden (D-Ore.) And House Ways and Means Chairman Richard Neal (D-Mass.) Have taken different approaches to taxation.

Wyden has teamed up with Warner and Sen. Sherrod Brown, Ohio, to publish his own plan on international taxes, which in places deviates from the government’s plans. In the meantime, Neal has sat back for the most part while acknowledging that the House, Senate, and White House must all come on the same page at some point.

And if they try, the Democrats will have nearly zero votes left in the Senate and only four in the House of Representatives until there are more special elections.

Republican leaders had more padding when they passed the tax bill in 2017 until they could write off GOP House members in California, New Jersey, and New York who opposed state and local deductions and pass the bill anyway.

Without this luxury, Democrats could be in disarray even if they get the vast majority of their lawmakers on board with proposed tax hikes.

The legislators, who want to take their priorities into account in a large infrastructure package, are also aware of this. Take the $ 10,000 cap on state and local deductions – Democrats from these suburbs, who have become crucial to the majority of the party in the House of Representatives, now swear not to vote for anything that doesn’t exceed those limits.

It’s not clear if they didn’t address this issue they would end up disrupting a large infrastructure package. But in the current environment, these suburban democrats have no reason to back off their demands.

“That is why I was elected to office and I believe that this is the right political decision,” said MP Tom Suozzi (D-N.Y.). “This would have detrimental long-term effects in advanced states.”

Brian Faler contributed to this report.

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