Democrats are forging plans to raise tax rates on companies and wealthy individuals next year if they hold the White House and win control of both houses of Congress, as the party’s leaders increasingly see tax policy as a winning issue on the campaign trail.
Senate Finance Committee Democrats met Thursday to discuss President Donald Trump’s 2017 Tax Cuts and Jobs Act, portions of which expire in 2025. Pressure is already mounting from the party’s left flank to insist on sharp increases in the corporate tax rate and on the highest individual earners – and not to agree to any compromise with Republicans otherwise.
Sen. Elizabeth Warren (D-Mass.) warned Democrats against taking “the coward’s way out” by agreeing to milquetoast legislation with conservatives in a speech to progressive groups Monday.
“One bad tax deal after another is killing our country,” she said in an interview. “The American people are sick of that. They understand that tossing a few crumbs their way is not an excuse for taking a lousy tax deal that puts our nation deeper in an economic hole and puts the things we need further out of reach.”
In the House, some top lawmakers are reevaluating past tax-and-spending bills that prioritized broad short-term investments that have since expired, demanding instead that Democrats focus on bringing in more revenue from major corporations and the rich that can permanently fund a limited number of high-impact social programs.
“If something’s important, let’s make sure we’re making it a priority and doing it for a longer term. And if it’s not a priority, maybe we don’t need to do it anymore,” said Rep. Suzan DelBene (Wash.), chair of the Democratic Congressional Campaign Committee.
Together, though, Democrats see taxes as a potent campaign issue.
Trump’s 2017 tax law lowered rates for big businesses and taxpayers of nearly all income levels, though it cut the most for the highest earners. The individual portions of that law expire next year, but the corporate tax cuts are permanent, a windfall for the firms that Trump is now courting to finance his campaign.
Biden and Democrats have spotted that dynamic as a political opening.
“Tax fairness resonates very strongly with people,” Lael Brainard, Biden’s national economic adviser, told reporters this month. “The sense that billionaires should pay their fair share, that large corporations should pay their fair share, the ultrawealthy – that is something that very much resonates with people. They don’t understand why somebody who has hundreds of millions of dollars in income pays a tiny share of their actual income relative to a schoolteacher or a firefighter.”
Biden proposes to raise corporate rates from 21 percent to 28 percent – still below the 35 percent rate Trump’s 2017 law cut it from – and preserve the Trump-era tax cuts for individuals earning less than $400,000, including a higher standard deduction.
Trump, meanwhile, told business leaders this month that he hopes to cut corporate taxes to 20 percent, according to two people familiar with his remarks who spoke on the condition of anonymity to discuss a private meeting.
“When President Trump is back in the White House, he will advocate for more tax cuts for all Americans and reinvigorate America’s energy industry to bring down inflation, lower the cost of living and pay down our debt,” Karoline Leavitt, the Trump campaign’s national press secretary, said in a statement.
Raising corporate taxes would require a Democratic sweep of Washington, but some Democrats are discreetly bullish on their chances for those wins. House Republicans’ narrow majority has struggled to govern effectively, and Democrats need only to gain five seats for a majority. In the Senate, their odds are worse, but recent polls show vulnerable Democratic incumbents in Ohio, Montana, Pennsylvania, Nevada and a challenger in Arizona outperforming expectations.
“[The White House] is very clear on their plans for 2025, and what they’re going to do in terms of taxing the wealthy and corporations who’ve been highly, highly profitable, reached all-time profits during post-pandemic period, and they think those plans are a marked contrast to what Republicans would do in the same situation,” said Lindsay Owens, CEO of progressive advocacy group Groundwork Collaborative.
Trump and Republicans have pledged to renew the entire 2017 tax law. The Congressional Budget Office projects that extension would cost $4.6 trillion over 10 years, adding to an already exploding federal debt burden.
But Republicans say those tax cuts are necessary to combat the historic inflation that’s hit the economy on Biden’s watch and to keep the United States competitive internationally with countries that have lower business taxes.
“This is going be a big debate we’re going to have, I’m sure through the election, because President Biden wants to raise everybody’s taxes,” Rep. Steve Scalise (R-La.), the No. 2 Republican in the House, told The Washington Post. “He tries to act like it’s not going to affect certain people, but when you raise taxes, it hits everybody, especially low-income families. Look at what his energy policies have done. The people hit the hardest are low-income families paying higher gas prices, paying more at the grocery store and more for their household electricity bills all because of bad Biden policies.”
The Biden administration, citing record corporate profits in recent years, rejects that approach.
“There simply is no reason we can look at our economy right now and justify tax cuts for millionaires,” Daniel Hornung, deputy director of the White House National Economic Council, said Monday at the left-leaning Washington Center for Equitable Growth.
Democrats are split on what to do with the revenue their proposed tax increases would generate. Previous Biden-era investments covered a broad swath of programs, from child care to internet access and housing support. Many of those programs have since expired, and with divided control of Congress, they have little chance of being reinstated. Biden’s budget, a largely symbolic reelection blueprint, called for new federal spending to lower consumer costs for health care, child care and housing.
Congressional Democrats may face a choice of whether to invest broadly again in short-term programs or provide long-term or permanent funding for fewer initiatives.
For instance, Sen. Ron Wyden (D-Ore.), chair of the Senate Finance Committee, co-sponsored legislation with House Ways and Means Committee Chairman Jason T. Smith (R-Mo.) to expand the child tax credit, paired with some corporate tax breaks. That bill passed the House but has stalled in the Senate due to GOP opposition to the low-income provision.
“If I had my way, we’d basically use the frame in 2021” to dramatically expand the credit, Wyden told The Post.
But House Democrats, many of whom are still smarting over the 2021 expiration of a more generous version of the child tax credit, want to push for bigger and longer-lasting programs if they get the chance.
“I’ve been around this place long enough to understand that when you do settle for less, the opportunity doesn’t come around for another 20, 25 years before you can do something again. These folks check the box. My view is, let’s go deep,” Rep. Rosa DeLauro (Conn.), the top Democrat on the House Appropriations Committee, told The Post.
Rep. Richard E. Neal (D.-Mass), who would be in line to chair the tax-writing Ways and Means Committee if Democrats win the House, said in an interview: “The term investment means, I’d like to think, a long-term commitment.”
(c) Washington Post
