Biden leans into plans to tax the rich
By Jim Tankersley and Annie Karni
President Joe Biden delivered a clear and punchy message to America’s highest earners last week: I’m going to raise your taxes, but your vacation homes are safe.
In an exchange with reporters Wednesday at the White House, Biden defended with gusto his plans to increase taxes on high earners and the wealthy. He railed against high-earning CEOs and promised that his plans were “about making the average multimillionaire pay just a fair share.”
“We’re not going to deprive any of these executives of their second or third home, travel privately by jet,” Biden said after brief remarks on an economic aid program he signed into law this year. “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 people I grew up with.”
The comments were the latest example of Biden and his party embracing the political and economic upsides of his proposals to tax the rich — a fight that the White House is eager to wage as the president engages in bipartisan negotiations over his $4 trillion economic agenda and a contrast to how Democratic presidents in the past have talked about their tax-increase proposals.
Republicans and business groups have blasted Biden’s plans to fund new spending on roads, bridges, low-carbon energy deployment, child care, education and a host of other initiatives by raising taxes on corporations, high earners and the wealthy. Biden has responded by amplifying his arguments: In recent remarks, he has focused almost as much on the tax increases as he has on the programs they would pay for.
Biden’s comments reflect both a read of public polling and a negotiating tactic. He is presenting the tax increases not simply as a method of paying for his sprawling agenda but as a policy goal on their own, aimed at narrowing gaps in income and wealth that have been exposed in stark terms by the coronavirus pandemic. He and his aides see a chance to turn the issue against Republicans who have long preached tax cuts and hammered Democrats for supporting any tax increases.
A wide range of polls now show broad public support for tax increases on high earners. A Pew Research poll last week found that Americans were much more likely to be upset that the wealthy and corporations did not pay “their fair share” in taxes than to be upset about the size of their own tax bills.
Republicans in Congress continue to warn that Biden’s tax increases could cripple an economy that is just beginning to recover from the pandemic downturn and hurt workers, even though the president has vowed not to raise taxes on individuals or households earning less than $400,000. They say that corporate tax increases will hurt business investment and growth and that companies will pass some of those increases on to their workers in the form of lower wages.
“Ultimately, his political standing is judged by the health and well-being of the economy,” said Josh Holmes, a political adviser to Sen. Mitch McConnell of Kentucky, the Republican leader. “What he’s talking about from a tax perspective is administration-assisted suicide.”
But Holmes agreed that, at least in the short term, Biden was making a winning political calculation. “He’s right that corporate tax increases are not unpopular,” Holmes said. But the political calculus for Republicans is that the policies themselves will prove unpopular with American voters by the midterm elections because of their effect on workers and the economy, he said.
Independent forecasters largely expect the economy to boom this year as the country reopens widely for economic activity on the strength of COVID-19 vaccinations. Analyses vary on how Biden’s $4 trillion agenda could affect that. Analysts at the Penn Wharton Budget Model predict the tax increases would hurt growth, on balance. Wells Fargo forecasters wrote this week that Biden’s infrastructure package, including the corporate tax increases that would fund it, would increase growth in the coming years.
The fight in Washington over Biden’s plans is a continuation of a battle that began under President Donald Trump, who signed a $1.5 trillion tax cut package into law in 2017.
Democrats successfully portrayed the cuts as benefiting the rich, and they never reached the kind of public popularity that Republican leaders envisioned. Republicans largely abandoned plans to focus on the tax cuts during the 2018 midterm election campaigns.
“There were far more Democratic ads about it than there were Republican ads,” said Geoff Garin, a Democratic pollster.
In many ways, those tax cuts have given Biden an opportunity, Garin said.
“When Biden talks about the corporate tax rate, he frames it in the context of rolling back the 2017 corporate tax cut as opposed to an out-of-the-blue increase on corporations,” he said. “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.”
White House officials also cite the 2017 law in explaining their aggressive stance on the tax issue. “The pandemic laid bare huge inequalities in this country,” said Anita Dunn, a senior White House adviser. “Even before, the 2017 tax cut was very unpopular.”
In memos to lawmakers on Capitol Hill and political allies obtained by The New York Times, Dunn outlined how raising taxes appeared to be a winning political issue for the president. She noted a Fox News poll from April that showed 56% of respondents favored paying for infrastructure plans by increasing the tax rate on businesses and corporations. And she flagged a Washington Post poll from last month that showed 58% of respondents supported raising the corporate tax rate to 28%.
In a second memo, she noted that some tax increases on the wealthy were even supported by a majority of Republican voters.
Republicans and business groups have responded by mounting a renewed defense of Trump’s tax cuts, casting them as the primary driver of economic growth in 2018 and 2019. Growth accelerated in the first year after the cuts were passed, but it decelerated in 2019, as many analysts had predicted when the cuts were approved.