Joe Biden wants a tax code that supports the everyday, salt-of-the-earth Americans who earn $400,000 a year.
In an interview with CNBC Friday morning, the Democratic nominee sounded some populist notes while defending his (quite progressive) ideas for raising taxes on capital gains, corporations, and the labor income of the superrich. “My tax policy is based on a simple proposition,” Biden explained, “which is, stop rewarding wealth and start rewarding work a little bit.”
But while blue America’s standard-bearer evinced enthusiasm for soaking the superrich, he vowed to preserve the (historically low) tax rates that America’s merely rich currently pay: Under a Biden administration, “Nobody making under 400,000 bucks would have their taxes raised. Period. Bingo,” the candidate declared.
Biden’s position here is neither new nor strictly true. Although the candidate has never formally pledged to preserve the Trump tax cuts for America’s top 5 percent, his long-public proposal for increasing Social Security benefits raises payroll taxes only on workers who earn more than $400,000. And none of Biden’s other tax plans raise the marginal rates of workers whose incomes fall below that threshold.
Nevertheless, plenty of people who earn low-six-figure salaries would pay more to Uncle Sam if Biden’s policies on corporate and investor taxation were implemented (a point that Republican operatives are already seizing on). If you earn $300,000 a year, chances are, you own shares in publicly traded companies. If those companies pay higher taxes, then they will have less cash left over for paying you dividends. Meanwhile, when you decide to cash out part of your portfolio to finance that long-overdue kitchen renovation (granite doesn’t pay for itself!), Biden’s proposed capital gains tax hike will eat into your winnings.
Pragmatic liberals might be inclined to build a defense of Biden’s pledge atop these facts. And they do have other materials with which to construct such an apology. For example, it is true that Democrats do not need to offset all new spending in ordinary times — and shouldn’t do so amid a deflationary economic crisis. Should Biden take office next January, he will likely inherit double-digit unemployment and near-zero interest rates. In such a context, it would probably be preferable for Democrats to finance a green infrastructure stimulus with deficit spending than taxes on the affluent.
And it is also true that there is quite a bit of income and wealth at the very tippy top of the U.S. economy to tax. While America’s high-earning professionals have done quite well in recent decades, their gains pale in comparison to those of the billionaire class.
Given these realities — and the fact that, in a best case scenario, Biden will only be able to pass as much progressive legislation as Kyrsten Sinema and Joe Manchin allow him to — the candidate’s pledge may be of little near-term consequence. And if that is so, then why begrudge Biden his pandering to the marginal McMansion dweller?
But this line of argument is misguided for several reasons. First, there is scant evidence that Biden will derive any electoral benefit from disavowing Obama-era tax rates on the upper-upper “middle class.” This constituency is a miniscule fraction of the American public. In 2016, voters who earned more than $250,000 a year made up 6 percent of the electorate, according to exit polls (which likely overrepresent them). Of this 6 percent, roughly half supported Hillary Clinton — even though she explicitly endorsed raising taxes on Americans who earned more than a quarter-million dollars a year.
So Biden’s pledge is ostensibly a play for that fraction of the remaining 3 percent who earn less than $400,000 a year and are open to voting for a Democrat in 2020 — but only if they are explicitly promised that taxes on their labor income won’t go up (even as taxes on their retirement savings will). Yes, every vote counts. But it is hard to believe that this is an electorally significant constituency. To the extent that affluent Trump voters are gettable in 2020, the trajectory of the pandemic and recession will (almost certainly) exert far more influence over their ultimate choice than a pledge that Republican attack ads — and, in all likelihood, pedantic fact checkers — are going to dispute.
Meanwhile, among the electorate as a whole, taxing the affluent is a political winner. In a recent poll, the progressive think tank Data for Progress (DFP) examined how public support for a $1 trillion infrastructure plan shifted when respondents were presented with different financing options. In the survey’s “control” condition — in which voters were merely asked whether they supported the infrastructure proposal, without any mention of how it would be paid for — 62 percent endorsed the idea. When respondents were told that the program would be funded with a “surtax on income over $200,000,” support rose to 65 percent. In other words: A popular spending idea became more popular once it was wedded to the idea of taking money from well-heeled professionals.
By contrast, when DFP proposed paying for the new infrastructure with “deficit funding,” support collapsed to 50 percent.
Thus, there’s little basis for believing that Biden’s vow to protect people who earn $399,000 a year from higher taxes is electorally expedient.
Substantively, meanwhile, the idea is indefensible.
Yes, Democrats should overcome their deficit-phobia and cease insisting that all new spending must be offset dollar-for-dollar (even if a superstitious attachment to that principle is prevalent among voters). But there is simply no way for the party to durably finance the kind of welfare state that Joe Biden claims to support on deficit spending and soaking the uber-rich alone.
Real resource constraints exist. And if America is going to tackle the defining challenges of the 21st century, it is going to test those constraints: Reducing and mitigating climate change will take a lot of labor and raw materials! If we also want to transform health care, child care, higher education, and paid leave into universal rights — while raising the purchasing power of service-sector workers — we’re going to need broad-based taxation. Putting all of these things onto the superrich’s tab might work for a little while. But eventually, such taxes will reduce inequality and thus the amount of revenue one can squeeze from the top 1 percent.
And this isn’t just a distant concern. If Democrats take power next year, they will preside over a deeply troubled, grotesquely unequal economy. Biden has signaled an understanding of this fact in recent weeks. He reportedly aspires to an “FDR-sized presidency.” Four months ago, such rhetoric would have sounded implausible. But in a context where 1) tens of millions of Americans have lost their jobs through no fault of their own, 2) the private sector is durably failing to create employment opportunities, and 3) access to America’s employer-based social safety net is rapidly contracting, sweeping reform becomes politically thinkable. If the present crisis has proved sufficient to force Mitch McConnell to sign off on $3 trillion in stimulus spending — including direct cash payments and elevated unemployment benefits to ordinary people — it could plausibly rally a Democratic Senate majority around multiple modest social-democratic reforms.
But due to the rules governing budget reconciliation and/or the fiscal superstitions of many Democratic senators, enacting such reforms will likely require embracing small, broad-based tax increases. For example, Kirsten Gillibrand’s FAMILY Act — which boasts 34 co-sponsors in the Senate — is nonviable under Biden’s pledge, since it funds universal leave benefits with a 0.4 percent increase in payroll taxes.
It is true that broad-based tax increases come with real political risks. For reasons good and bad, many Americans do not trust their government to give them good value for their tax dollars. But it’s also true that once the federal government has earned that trust, using middle-class taxes to fund universal social programs becomes very popular. Republicans cannot win elections by promising to deliver giant payroll-tax cuts at the cost of defunding Social Security. Generally speaking, the idea of slashing funding for public schools to give the middle class a tax break is not a popular one. Challenging voters’ skepticism of the public sector’s competence — and then earning their trust by enacting and effectively administering new social programs — is fundamental to the progressive project in the United States.
Given the stakes of this year’s election, it is understandable that Joe Biden would avoid full-throated advocacy for broad-based tax increases on the campaign trail. But if he wishes to be a 21st century FDR — which is to say, a president who durably increases the public’s expectations of their government and the possibilities for egalitarian reform — then he is going to have to challenge Americans’ aversion to taxation at some point. Endorsing tax hikes on Americans earning $300,000 a year is not an excessively ambitious place to start.
