‘The Era of Trickle-Down Tax Cuts For the Wealthy Is Over’

The caption is a play on President Bill Clinton’s oft-quoted line “the era of big government is over.” People always forget that it was immediately followed by “but we cannot go back to the time when our citizens were left to fend for themselves. We must go forward as one America, one nation working together, to meet the challenges we face together.”

Bloomberg News reports, Biden Eyes First Major Tax Hike Since 1993 in Next Economic Plan:

President Joe Biden is planning the first major federal tax hike since 1993 [The Omnibus Budget Reconciliation Act of 1993, which increased the top federal income tax rate from 31% to 39.6%, increased the corporate income tax rate, raised fuel taxes, and raised various other taxes, paired with spending cuts], to help pay for the long-term economic program designed as a follow-up to his pandemic-relief bill, according to people familiar with the matter.

President Bill Clinton not only balanced the federal budget, but ran budget surpluses that nearly paid off the national debt, before George W. Bush’s massive trickle-down tax cuts for corporations and the wealthy blew up the federal deficit – followed by two wars he put on Americas’s credit card, and causing the worst economic crisis since the Great Depression.

Unlike the $1.9 trillion Covid-19 stimulus act, the next initiative, which is expected to be even bigger, won’t rely just on government debt as a funding source. While it’s been increasingly clear that tax hikes will be a component — Treasury Secretary Janet Yellen has said at least part of the next bill will have to be paid for, and pointed to higher rates — key advisers are now making preparations for a package of measures that could include an increase in both the corporate tax rate and the individual rate for high earners.

With each tax break and credit having its own lobbying constituency to back it, tinkering with rates is fraught with political risk. That helps explain why the tax hikes in Bill Clinton’s signature 1993 overhaul stand out from the modest modifications done since.

For the Biden administration, the planned changes are an opportunity not just to fund key initiatives like infrastructure, climate and expanded help for poorer Americans, but also to address what Democrats argue are inequities in the tax system itself. The plan will test both Biden’s capacity to woo Republicans and Democrats’ ability to remain unified.

“His whole outlook has always been that Americans believe tax policy needs to be fair, and he has viewed all of his policy options through that lens,” said Sarah Bianchi, head of U.S. public policy at Evercore ISI and a former economic aide to Biden. “That is why the focus is on addressing the unequal treatment between work and wealth.”

While the White House has rejected an outright wealth tax, as proposed by progressive Democratic Senator Elizabeth Warren, the administration’s current thinking does target the wealthy.

The Biden White House should reevaluate Treasury Secretary Janet Yellen’s reluctance to the wealth tax. Poll: Majority say wealth tax is part of the solution to wealth inequality:

A majority of voters say a wealth tax on the ultra-rich is part of the solution to the nation’s wealth inequality, a new Hill-HarrisX poll finds.

Fifty-six percent of registered voters in the March 5-8 survey said wealth inequality is a significant problem facing the country and billionaires paying a wealth tax is a part of the solution.

By contrast, 44 percent said it is unfair to impose an additional tax on people who already pay income taxes because it becomes a penalty for being successful.

Roughly 8 in 10 Democratic voters say a wealth tax is part of the solution to wealth inequality.

Sixty-four percent of Republican respondents and 51 percent of independents say it is unfair to impose an additional tax on people who already pay income taxes.

Last week, Sen. Elizabeth Warren (D-Mass.) introduced a wealth tax that would create an annual tax of 2 percent on the net worth of households and trusts between $50 million and $1 billion and a tax of 3 percent on net worth above $1 billion. [It also calls for a lesser, 2% annual wealth tax on the net worth of households and trusts ranging from $50 million to $1 billion.]

Note: This tax would effect a fraction of the top 0.1%, about 100,000 Americans — or, fewer than 1 in 1,000 families — would be subject to a wealth tax in 2023, according to Emmanuel Saez and Gabriel Zucman, economists at the University of California, Berkeley. The policy would raise at least $3 trillion over a decade, they found. [This is why the polling opposition is skewed: virtually none of the respondents would ever be effected by the wealth tax, and they will never be in the top 0.1%. If they actually understood this, the opposition would evaporate.]

Previous Hill-HarrisX data found 74 percent of voters supported an annual wealth tax on people with assets of at least $50 million, a similar proposal introduced by Warren while on the 2020 campaign trail.

A Feb. 2020 Hill-HarrisX survey found roughly two-thirds of Americans said they support a “wealth tax” on billionaires in an effort to close the wealth gap in the country.

The White House is expected to propose a suite of tax increases, mostly mirroring Biden’s 2020 campaign proposals, according to four people familiar with the discussions.

The tax hikes included in any broader infrastructure and jobs package are likely to include repealing portions of President Donald Trump’s 2017 tax law that benefit corporations and wealthy individuals, as well as making other changes to make the tax code more progressive, said the people familiar with the plan.

The following are among proposals currently planned or under consideration, according to the people, who asked not to be named as the discussions are private:

      • Raising the corporate tax rate to 28% from 21% [still less than the Clinton top tax rate]
      • Paring back tax preferences for so-called pass-through businesses, such as limited-liability companies or partnerships
      • Raising the income tax rate on individuals earning more than $400,000
      • Expanding the estate tax’s reach
      • A higher capital-gains tax rate for individuals earning at least $1 million annually. (Biden on the campaign trail proposed applying income-tax rates, which would be higher)

White House economist Heather Boushey underlined that Biden doesn’t intend to boost taxes on people earning less than $400,000 a year. But for “folks at the top who’ve been able to benefit from this economy and haven’t been this hard hit, there’s a lot of room there to think about what kinds of revenue we can raise,” she said in a Bloomberg TV interview Monday.

An independent analysis of the Biden campaign tax plan done by the Tax Policy Center estimated it would raise $2.1 trillion over a decade, though the administration’s plan is likely to be smaller. Bianchi earlier this month wrote that congressional Democrats might agree to $500 billion.

The overall program has yet to be unveiled, with analysts penciling in $2 trillion to $4 trillion. No date has yet been set for an announcement, though the White House said the plan would follow the signing of the Covid-19 relief bill.

An outstanding question for Democrats is which parts of the package need to be funded, amid debate over whether infrastructure ultimately pays for itself — especially given current borrowing costs, which remain historically low. Efforts to make the expanded child tax credit in the pandemic-aid bill permanent — something with a price tag estimated at more than $1 trillion over a decade — could be harder to sell if pitched as entirely debt-financed.

Democrats would need at least 10 Republicans to back the bill to move it under regular Senate rules. But GOP members are signaling they are prepared to fight.

“We’ll have a big robust discussion about the appropriateness of a big tax increase,” Senate Minority Leader Mitch McConnell said last month, predicting Democrats would pursue a reconciliation bill that forgoes the GOP and would aim for a corporate tax even higher than 28%.

“When someone shows you who they are, believe them the first time.” – Maya Angelou.

While Democrats Pass Stimulus, Republicans Unveil Estate Tax Repeal for Top 0.1%: While Democrats were busy passing the latest COVID stimulus package that will provide relief to millions of Americans through Congress, Republican leaders were pleased to introduce their own legislation: a renewed attempt at repealing the estate tax. [Because the tax exemption threshold is so high, an estimated less than 0.1 percent of estate tax returns will pay the federal estate tax for 2020. In other words, Republicans are fighting for a repeal of a tax for the richest 0.1 percent of dead people.] Michael Hiltzik of the LA Times, Countering Dem relief package, GOP proposes a huge giveaway to the rich.

While about 18% of the George W. Bush administration’s tax cuts were allowed to expire in a 2013 deal, and other legislation has seen some increases in levies, 1993 marks the last comprehensive set of increases, experts say. That bill passed on a two-vote margin in the House and required the vice president to break a tie in the Senate.

“I don’t think it is an understatement to say the current partisan environment is more severe than 1993” said Ken Kies, managing director of the Federal Policy Group, a former chief of staff of the congressional Joint Committee on Taxation. “So you can draw your own conclusions” about prospects for a deal this year, he said.

Still, there could be some tax initiatives Republicans could get behind. One is a shift from a gasoline tax [the 18.4-cent federal gas tax was last raised in 1993] to a vehicle-miles-traveled fee to help fund highway projects.

See, Two states tax some drivers by the mile. Many more want to give it a try. “States are leading the way, with Oregon and Utah launching the first programs and several others running pilots to test technology and build public support. The approach has bipartisan support in Washington, and Transportation Secretary Pete Buttigieg has signaled his openness.” “A dozen states are considering legislation this year to update, launch or study programs, including California — where the governor wants to end sales of gas-powered cars by 2035 — and Wyoming.”

“The federal government has issued tens of millions of dollars in grants to back state projects exploring mileage-based tax programs. A bill that passed the House last year would have set up a national pilot program to tax vehicles by miles driven, and a Senate committee endorsed the idea. The Federal Highway Administration is beginning to explore how a pilot program might work, a spokeswoman said.”

Another is more money for Internal Revenue Service enforcement — a way to boost revenue without raising rates. Estimates have found that for every additional $1 spent on IRS audits, the agency brings in an additional $3 to $5.

Democrats are also looking to revise tax laws that they say don’t do enough to stop U.S. companies from shifting jobs and profits offshore as another way to raise revenue, one aide said. Republicans could potentially support incentives, though it’s unclear whether they’d back penalties.

White House officials including deputy director of the National Economic Council, David Kamin — who wrote a 2019 paper on “Taxing the Rich” — are in the process of fleshing out the Biden tax plans.

* * *

Democratic strategists see the next package as effectively the last chance to reshape the U.S. economy on a grand scale before lawmakers turn to the 2022 mid-term campaign.

“Normally, the party in power gets one or two shots to do major legislative packages,” said Chuck Marr, senior director of Federal Tax Policy at the left-leaning Center on Budget and Policy Priorities. “This is the next shot.”






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1 thought on “‘The Era of Trickle-Down Tax Cuts For the Wealthy Is Over’”

  1. It’s been repeatedly shown how pathetic the MSM can be by whenever Moscow Mitch spewed “tax cuts pay for themselves” not a single journalist challenged that assertion to his face by pointing out that hasn’t worked for 40 years so why is he still saying it? Oh wait, this is the era of access journalism where access to proven liars is more important than pursuing and reporting the truth.

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