That Republicans are dead set on defending the wallets of the well-off should come as no surprise. Stop me if you think you’ve heard this one before, but we need only look at the single wide-ranging legislative achievement of the Trump era—the aforementioned tax cut that disproportionately benefits those at the very top.
How deep does the GOP’s service to the wealthy go? In the depths of the COVID-19 pandemic last spring, Republicans even slipped measures into the CARES Act relief package that will deliver over $100 billion to those earning a million bucks a year. As I wrote then, “Trump and Republicans never miss an opportunity to help the top 1%, not even during a pandemic.” This year, Democrats have called for the repeal of these measures; hopefully, they are able to accomplish this.
Students of history know that Republicans have acted this way long before Trump. In 2001 and 2003, George W. Bush signed into law changes to the tax code that also mostly helped the rich get richer.
Lest we forget, Dubya’s tax scheme helped turn the budget surplus handed to him by his predecessor, Bill Clinton, into major deficits. Overall, according to the Center on Budget and Policy Priorities, “(e)vidence suggests that the tax cuts—particularly those for high-income households — did not improve economic growth or pay for themselves, but instead ballooned deficits and debt and contributed to a rise in income inequality. In fact, the economic expansion that lasted from 2001 to 2007 was weaker than average.”
It’s worth noting that Clinton raised taxes on the rich in 1993, which played a significant role in creating budget surpluses in subsequent years. Despite Republican predictions to the contrary, the broader economy boomed as well. As you can see below, job growth was far stronger after Clinton and President Barack Obama raised taxes on those with the highest incomes than after George W. Bush cut taxes for the rich. Once again, the facts prove that Republican talking points about such policies funneling wealth to the top so that it could then trickle down to everyone else are lies. Even George H.W. Bush said so in 1980—and he actually told the truth, because he was running against Ronald Reagan.
Reagan swept into office and Republicans took the Senate in 1980—along with gaining effective control of the House, thanks to conservative “boll weevil” Democrats. The tax cuts enacted shortly after also largely benefited the wealthy, but didn’t do much for the economy, or the rest of America, as the Center for American Progress notes.
In fact, despite the legend, there is little evidence that the personal income tax cuts enacted by President Reagan in 1981 meaningfully boosted the economy; as research by Reagan’s own chief economist has found, the so-called Reagan recovery of the early 1980s was driven by monetary policy, not tax cuts.
It’s not just at the federal level. In 2012, when conservative Republicans took control of Kansas during the governorship of Sam Brownback, they slashed taxes for the rich and actually shifted the tax burden from the wealthy to Kansans at and below the median income line. The Brownback tax scheme led to a collapse in revenues and an economic meltdown in the state.
Likewise, a comparative study covering 1965 to 2015 found that cutting taxes for the rich at various times in 18 wealthy countries did not lead to economic growth or an improved employment situation. What did it lead to? More wealth going to those at the top, and thus greater economic inequality.
Joseph Stiglitz is a Nobel Prize-winning economist who offered the following summary a few years ago to Rolling Stone to help convey just how harmful economic inequality is.
It’s well documented that countries that are more unequal don’t do as well, don’t grow as well and they are less stable. It’s not an accident that in the period right before the Great Depression, our inequality reached another peak just like it did in the years before the Great Recession. Inequality destroys growth.
[….] Economic inequality puts our democracy in peril by undermining our basic principles of one person, one vote; and how our notion of America as a land of opportunity has been undermined and our principle of justice for all has been perverted into justice for those who can afford it. If you go through almost every social and important political economic debate, it’s being shaped by the massive inequality we’re facing today.
High levels of economic inequality lead to imbalances in political power as those at the top use their economic weight to shape our politics in ways that give them more economic power. If you look at so many of the outcomes in our political process, no one can say that they reflect the interests of most Americans. Most Americans don’t think speculators should be taxed at a fraction of people that work for a living; or that banks should be allowed to engage in predatory lending or abusive credit card practices; or that drug companies be allowed to get special benefits out of the government in the form of overpayments; or that mining companies should be able to get natural resources at below competitive prices.
If you want to dig deeper into Stiglitz’s work without reading a whole book, check out this paper.
To return to the policy debate at hand, Biden should, as Emily Stewart wrote in her recent analysis for Vox, “tax the rich because it’s the right thing to do.” Those in the tippity-top sliver have made out like bandits over the past four decades since the vaunted Reagan Revolution. The top 1% went from capturing 9% of all pre-tax income to a whopping 16%—almost doubling their share. As you can see in the graph below, this tiny group now has a greater share of before-tax income than that earned by the bottom 40% of Americans combined.
COVID-19 only exacerbated the already severe inequality in our country.
The Biden-Harris administration is sticking to its guns on raising taxes on the rich, despite the “anger, denial, and grief” issuing forth from some fat cats—with one lamenting that “overtaxing success is un-American”—as well as the cries of “socialism” being spewed by right-wing opponents.
The president, in recent remarks, explained that his goal is not to punish anyone, or to radically redistribute wealth, but rather to bring back a greater degree of fairness. “This is about making the average multimillionaire pay just a fair share … We’re not going to deprive any of these executives that second or third home,” Biden said, noting that the very rich can still afford to ”travel privately by jet” under his plan. “It’s not going to affect their standard of living at all, not a little tiny bit. But I can affect the standard of living of the people I grew up with,” he added.
Biden went on to directly contrast his approach to that of Trump’s Party.
The bottom line is this: My Republican friends had no problem voting to pass a tax proposal that expires in 2025, that cost $2 trillion—none of it paid for— increased the deficit by $2 trillion; gave the overwhelming percentage of those tax breaks to people who didn’t need it: the top one tenth of 1 percent. They didn’t need it.
And it was argued that what it would do is generate this great economic surge and growth. It would increase productivity. It would pay for itself. It would generate a sense of growth in America we hadn’t seen ever before. Well, everyone from the Heritage Foundation on [down] has pointed out it hadn’t done that—hadn’t done that.
The president also highlighted some of the real problems with the current tax code: “For example … 35 or 30 corporations didn’t pay a single solitary penny last year, and they’re Fortune 500 companies. They made $400 billion. They paid no taxes.”
President Biden stated clearly that he was willing to compromise on some of the specifics, if Republicans compromised as well, but added that he wanted to have his investment plans paid for. Given his prior promises, that means raising taxes on corporate profits and the wealthiest individuals.
This is the right thing to do for the American people. Oftentimes doing the right thing is unpopular, but in this case, the exact opposite is true, as a poll from Morning Consult found.
57% of voters say they’d be more likely to support Biden’s infrastructure plan if it were funded by tax increases on those making over $400,000.
47% of voters say they’d be more likely to support the $3 trillion proposal if it were funded by increases to the corporate tax rate.
A number of other polls—including one from Daily Kos/Civiqs that found majority support for both elements of the tax hikes—also indicate broad support for the Biden-Harris plan on taxes. As Rahm Emanuel, President Obama’s first chief of staff, noted: “On taxes, Biden has flipped the script on Republicans. Especially since the Biden tax plan is popular with the GOP base. Biden knows this and is taunting them, head on.”
The key for Biden and other Democrats is, as Democratic pollster Geoff Garin explained, to continue framing their proposals “in the context of rolling back the 2017 corporate tax cut as opposed to an out-of-the-blue increase on corporations.” He added: “It’s clear from polling that when you provide the context of the 2017 corporate tax cut, which most voters feel was excessive and wasteful, support for the Biden proposal goes even higher.”
Meanwhile, McConnell has drawn a “red line” at keeping Trump’s Rich Man’s Tax Cut in place. Short of an indictment of Trump—which looks more possible than ever—that’s the best political news Democrats could ask for. Make Moscow Mitch (no, we won’t forget that moniker) stand and fight on that line—right up to the midterms, if necessary. Believe me, if that campaign centers around a debate over whether it’s a good idea to raise taxes on the top 1% and on Fortune 500 companies, that’s one Team Blue is going to win. The Biden-Harris administration should welcome such a fight as eagerly as the twice impeached former guy applies his beloved Bronx Colors’ Boosting Hydrating Concealer.
In terms of politics, ensuring that the most fortunate among us pay more is also crucial to showing middle- and working-class Americans that Democrats share their values—real populist values rather than the faux, falsehood-laden culture war populism of Trump. Because for decades Republicans have had no economic policy agenda to help 90% of Americans—including most white people—the only card they’ve had to play is the white identity politics card.
Keeping the white Christian masses angry at and afraid of Americans of color has been the stock-in-trade of the economic elite, going back for centuries, starting after white indentured servants and Black slaves fought together and threatened the slave-owning power structure during Bacon’s Rebellion in 1676. Trump is merely the latest iteration.
Democrats have a chance to take a real bite out of economic inequality with a major reform of our tax code. Doing so is an absolute necessity, even apart from funding the vitally important investments the Biden-Harris administration is proposing to make in infrastructure, the care economy, and more.
Biden and progressives are right that we need to raise taxes on the rich and corporations in order to address the extreme economic inequality that causes harm to our economy, to our political system, and to the most vulnerable Americans.
Ian Reifowitz is the author of The Tribalization of Politics: How Rush Limbaugh’s Race-Baiting Rhetoric on the Obama Presidency Paved the Way for Trump (Foreword by Markos Moulitsas)