Soak-the-rich tax plans take hold in the entire Democratic field
Senators Bernie Sanders and Elizabeth Warren would bring one of the most progressive tax agendas in history to the White House if either of them were to become president. So would every other Democrat vying for the presidency.
Significantly higher taxes on Wall Street, wealthy individuals, corporations and capital gains have long been fixtures on progressive wish lists. In the 2020 campaign, some form of those ideas appear in every major presidential candidate’s tax plan, including billionaire Michael Bloomberg, a late entry to the race.
“Democrats for a long time have had an allergy to being accused of being tax raisers,” said Seth Hanlon, a senior fellow at the Center for American Progress. “The growth of income inequality and the passage of the Trump tax law that’s skewed to the wealthy and corporations are big reasons why you see the ‘moderate’ candidates looking at fixing fundamental problems with the tax system.”
In Wednesday’s debate, the 2020 Democratic hopefuls drew contrasts between their health care plans and governmental experience. The one thing they agreed on? Raising taxes.
“If we really want to deliver less inequality in this country, then we’ve got to start with the tax code,” said Pete Buttigieg, the former mayor of South Bend, Indiana, who’s won more delegates than any other moderate candidate in the two states to vote so far.
There’s been a dramatic shift in the scope and type of tax ideas featured in 2020 Democratic platforms. Hillary Clinton’s 2016 tax proposal included raising some capital gains rates, expanding the estate tax, and putting a surcharge on wealthy taxpayers, which would have raised $1.4 trillion over a decade, according to estimates from the Tax Foundation. Sanders at the time proposed $13.6 trillion in tax increases, which foreshadowed many of the ideas that would resurface this year.
Moderates this cycle are proposing tax plans that are significantly larger than Clinton’s. Former Vice President Joe Biden estimates his plan would raise $3.2 trillion. Former New York City Mayor Bloomberg says his plan would raise at least $5 trillion over 10 years, and could expand that if he needs more revenue to pay for additional spending. Buttigieg has proposed at least $5.7 trillion in new spending and says he plans to fully offset it with tax increases.
“I agree we should raise taxes,” Bloomberg said in Wednesday’s debate. “The rich aren’t paying their fair share. We should raise taxes on the rich. I did that as mayor in New York City. I raised taxes. And if you take a look at my plans, the first thing I would do is try to convince Congress, because they’ve got to do it.”
(Bloomberg is the founder and majority owner of Bloomberg LP, the parent company of Bloomberg News).
There’s still a big difference of scale between moderate and progressive candidates. Warren is proposing more than $20.5 trillion in taxes to pay for her plans. Sanders acknowledges that his plan would raise middle-class taxes, although he says that would be offset by lower health care premiums.
Proposals from Senator Amy Klobuchar, Bloomberg, Biden and Buttigieg are significantly smaller because they aren’t trying to fund a Medicare-for-All plan that alone could cost tens of trillions of dollars. Bloomberg and Biden also don’t support a wealth tax that’s been at the center of the Sanders and Warren campaigns.
“I believe in capitalism, but I think the goal of someone in government and a president of the United States should be a check on that,” Klobuchar said Wednesday. “I’m not going to limit what people make, but I think right now our tax code is so tilted against regular people and that is what’s wrong.”
‘Most conservative position’
Hanlon, a former tax policy adviser for President Barack Obama, remembers putting out a 2015 plan to end a large tax break on inherited assets. The idea to have an heir pay taxes on more of the property’s appreciation, known as “stepped-up basis at death,” used to be novel. It’s now passé.
“Many of us thought it would be very controversial, that it was stepping out pretty far,” he said. “Now that’s the most conservative position.”
The quick embrace of ideas that long struggled to make it out of the hallways of left-leaning think tanks and university auditoriums has surprised some of the people who have been working on these proposals for years. Jared Bernstein, who served as chief economist to Biden when he was vice president, said he “choked” on his coffee when he saw that Bloomberg was supporting a 0.1% tax on all stock, bond and derivative trades.
“It’s been the kind of idea that a few others and I would write an op-ed on and then nothing would happen,” said Bernstein, now a senior fellow at the left-leaning Center on Budget and Policy Priorities.
Democrats say part of the reason tax plans have shifted to the left so quickly is that politicians are playing catch-up with the public. About 62 percent of Americans say that upper-income people pay “too little” in taxes, a figure that’s remained relatively stable for years, according to Gallup. That figures even higher for corporations, with 69 percent of people in 2019 saying corporations should pay more.
Winning the tax battle
They also point to the unpopularity of President Donald Trump’s tax law as part of the reason public opinion is shifting toward plans that increase the burden on companies and top earners. Only about a third of people approve of the 2017 overhaul, according to a Real Clear Politics polling average.
“In 2016, Bernie Sanders lost the war, but he won the battle on taxes,” said Brad Bannon, a Democratic strategist. “His candidacy was partially responsible for the shift in public opinion. It was the first time in a while that people said let’s look closely at how this trickle-down thing has made things worse.”
Democrats feel emboldened to suggest more ideas that they know might not become law, Bernstein said.
“For far too long, my side has negotiated with ourselves,” he said. “We would start the debate where we wanted to end, and we’d end up far short of even our moderate goals.”
It’s not just Democrats who are noticing a shift in the rhetoric. Republicans used to aim to get the top individual tax rate — now 37 percent after the 2017 tax cut — down to something in the 20s, said Alan Viard, a resident scholar at the right-leaning American Enterprise Institute. There’s no real push to lower that further or to give another cut to those at the top, he said.
“You do not hear much of the discussion that was common on the Republican side five to eight years ago,” said Viard, who served as an economist under President George W. Bush.
Trump says his advisers are working on another tax cut proposal that would direct benefits to the middle class, which could be an admission that the 2017 tax cut didn’t do enough for middle-earners.
“This didn’t totally come out of nowhere,” said Michael Linden, a fellow at the left-leaning Roosevelt Institute. “The unpopularity of the Trump tax law has made it much safer for Democrats to be unabashedly for raising taxes on the wealthy.”