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$100 bill Benjamin Franklin
President Biden’s robust packages of major legislation include plenty of innovative programs to rebuild a booming, transformative economy that will improve the lives of most Americans for years to come. His most politically popular innovation in taxation also is about to begin.
For decades, one rightwing Washington lobbyist has scared not only Republicans, but also many Democrats out of raising taxes on the wealthiest people in America. That’s Grover Norquist, president of Americans for Tax Reform, who convinced nearly every elected Republican to sign a pledge never to raise any taxes ever. His crude political philosophy: “I don’t want to abolish government. I simply want to reduce it to the size where I can drag it into the bathroom and drown it in the bathtub.”
Most Democrats wouldn’t sign such a ridiculously irresponsible pledge, but politicians in both parties remember that President Bill Clinton defeated incumbent George H.W. Bush in 1992 after Bush violated his tax pledge despite emphatically promising: “Read my lips. No new taxes.” Never mind raising taxes was fiscally responsible in 1990 to pull the country out of the recession following President Reagan’s huge tax cuts for the wealthy.
So what’s changed in the past 30 years to make Biden’s tax increases on the wealthy not just acceptable, but politically popular? After Biden’s defeat of President Trump, polls showed 67% of Americans supported raising taxes on wealthy individuals and corporations—88% of Democrats, 70% of independents and even 45% of Republicans.
Trump’s Millionaire Friends
One major development was Trump’s 2017 tax cut adding $2 trillion to the national debt over 10 years with 83% of the benefits going to the wealthiest 1%, Trump and his millionaire and billionaire friends. It was the first unpopular tax cut in political history. The voter backlash in 2018 returned control of House of Representatives to the Democrats.
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The backlash continued by ousting Trump last November and it was just as clear. When voters in 36 battleground congressional districts were presented with 10 issues, the importance of “making sure the wealthy and big corporations pay their fair share of taxes” was second only to “handling the coronavirus pandemic.” That meant fair taxation of enormous wealth ranked above “creating jobs,” “lowering healthcare costs” and “raising incomes for the middle class.”
All those issues were important, but voters are increasingly aware of just how obscenely distorted America’s tax system has become. Tax cut politics year after year have tremendously expanded the record wealth of those at the very top while average Americans fall further behind.
When ProPublica investigative journalists obtained tax records showing the nation’s best-known billionaires—folks like Jeff Bezos, Elon Musk, Michael Bloomberg, Bill Gates and Mark Zuckerberg — paid little or nothing in income taxes in recent years, it simply confirmed what Americans have always known.
Corporate Loopholes
The most fraudulent tax argument under Trump was how much Republicans should lower the corporate tax rate. Corporations were fighting to lower their top rate from 39% to 25%. Instead, Republicans lowered it to 21%. That made less difference than you might think. With tax credits and multiple loopholes, few corporations ever pay the actual tax rate. Fifty-five of the largest corporations paid no income tax at all on $40 billion in profits last year.
That’s why an overwhelming majority of Americans were eager for Biden and Democrats to stop allowing astronomically wealthy individuals and corporations to get away without paying any income taxes at all. That shouldn’t be difficult in a democracy, right?
It is when Republicans really don’t support democracy anymore and the Senate has 50 Democrats and 50 Republicans with Vice President Kamala Harris breaking ties. Democratic Sens. Joe Manchin and Kyrsten Sinema also were tag team obstructionists. When Manchin supported raising tax rates and closing tax loopholes on ultrarich individuals and corporations, Sinema refused.
But that didn’t prevent Biden and other Democrats from restructuring the economy to provide a wide range of desperately needed programs serving all Americans instead of just those at the top, all paid for without raising taxes for anyone making less than $400,000 a year.
It’s just the beginning of going after individual and corporate wealth that has long escaped taxation in creative new ways. That includes a minimum tax on corporations that otherwise would pay none and special surcharges on annual incomes above $10 million and $25 million. But the biggest source of new revenue could simply be an enormous increase in the underfunded IRS budget to hire more agents and modernize technology to go after high-income tax cheats. Research suggests the richest 1% underreport their actual income by more than 20%.
There’s a long way to go before the wealthiest Americans on the planet pay their fair share in taxes despite all the personal services they receive from politicians. We could speed up the process by removing every politician pledging never to raise taxes on the wealthy.
