When he served as Speaker of the House in the 1990s, then-
Rep. Newt Gingrich
(R., Ga.) could always count on getting a laugh at GOP events by doing his impression of a Democrat, which went something like this: “The answer is raising taxes! I’m sorry, what was the question?” Today’s congressional Democrats seem determined to confirm the stereotype. They are also increasingly willing to present raising taxes on their political foes not as a means to fund government but as an end in itself.
“Infrastructure talks collide with Democrats’ goal to tax the rich,” is the headline on a story in the New York Times. But far from a case of colliding agendas, the story is further evidence that raising taxes is the whole point of this legislative exercise. Jonathan Weisman writes that many Democrats “see a rare opportunity to harness the political popularity of infrastructure spending to achieve their long-held policy goal of raising taxes on the rich.” Just the rich?
On the spending side of the ledger, Team Biden and congressional Democrats have already made clear that they don’t want to fund the infrastructure consumers want. Now Democrats are clarifying that whether or not the funding yields anything one can conceivably call infrastructure, the important thing is for government to take money from citizens. According to the Times account:
For liberal Democrats in particular — including newcomers like Representative Alexandria Ocasio-Cortez of New York and more senior members like Senator
of Oregon — the tax side of the ledger is not a mere accounting exercise to pay for spending, but a critical policymaking tool unto itself.
“What we’re doing is generating revenue, but we are also making a major area of American government more fair, so people don’t feel they’ve been played while the rich person gets off scot-free,” said Mr. Wyden, the chairman of the tax-writing Finance Committee.
Not only does Mr. Wyden chair the Senate’s tax-writing committee, but he’s served in the Congress for more than 40 years. He cannot possibly be unaware of the sources of government revenue. The Oregon senator may choose to indulge the leftist myth that the U.S. doesn’t have a highly progressive tax system, but IRS data show that after the 2017 Trump tax reform cut rates for people up and down the income scale, the richest 1% of Americans now pay 40% of federal income taxes, and that percentage rose slightly after the Trump reforms.
Earlier this year the Tax Foundation’s
Since 2001, the share of federal income taxes paid by the top 1 percent increased from 33.2 percent to a new high of 40.1 percent in 2018.
In 2018, the top 50 percent of all taxpayers paid 97.1 percent of all individual income taxes, while the bottom 50 percent paid the remaining 2.9 percent.
The top 1 percent paid a greater share of individual income taxes (40.1 percent) than the bottom 90 percent combined (28.6 percent).
Democrats surely know this, and the goal is not simply to hit the rich. According to the Times account:
A tentative plan floated by Senator Bernie Sanders, the Vermont independent who is the chairman of the Senate Budget Committee, envisions spending as much as $6 trillion over 10 years on an economic package… Mr. Wyden’s committee would be expected to raise $2.5 trillion, a huge sum that could require significantly reordering the tax code.
It is a huge tax sum, and it appears the emerging plan on the left is to raise it disproportionately from rich people who live in states run by Republicans. Strategas Research and Bloomberg report today that Sen. Sanders intends to increase the federal tax deduction for state and local taxes—in other words he aims to cut taxes for rich people who live in left-leaning states with big state and local governments. Combined with the Biden budget plan to let the Trump tax cuts expire for low-income and middle-income Americans, the forecast is for higher taxes for almost everyone, but some disproportional relief for Democratic donors.
Bloomberg reports on the Sanders plan:
Senate Budget Committee Chairman Bernie Sanders is proposing to partially revive the federal deduction for state and local taxes… The proposal doesn’t specify how the state and local tax, or SALT, write-off proposal would work. But it provides a template for how Democrats could reach an agreement about how to address the tax break, that is a key priority for Democrats representing high-tax states, including New York and New Jersey…
Democrats have discussed several ways to offer limited SALT relief, including offering the full deduction for a couple of years, or setting income thresholds for who can claim the tax break. The $120 billion in Sanders’s plan isn’t enough funding to cover a permanent, full repeal of the $10,000 cap on the write-off.
The deduction makes it easier for politicians in places like New York and New Jersey to maintain high taxes and spending by forcing all U.S. taxpayers to subsidize such policies—as if U.S. taxpayers haven’t subsidized these state governments enough. Samantha Marcus and Brent Johnson at NJ.com report:
The pandemic was expected to have devastating financial consequences for New Jersey, but like many states it benefited from aggressive federal intervention that pumped tens of billions of dollars through the state economy. While [Democrat Gov. Phil] Murphy’s administration projected a $4.3 billion shortfall last fall, which it plugged with borrowing, tax collections since made up that ground — and then some.
The state Treasury Department last week raised its revenue forecast for this fiscal year by $4.1 billion and next year’s by $1.1 billion. That follows a $3.2 billion increase in projected tax collections in February, positioning the state to end the fiscal year on June 30 with a $10.1 billion surplus.
In addition to the unanticipated tax revenues, the state is sitting on an unspent $6.2 billion in federal American Rescue Plan aid.
The Sanders answer is to raise more federal taxes, especially from people in Republican-run states. Remind us again what reasonable question he could possibly be answering.
James Freeman is the co-author of “The Cost: Trump, China and American Revival.”
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