AMAC Exclusive – By Pat Conroy
While millions of Americans are still struggling to recover from the economic hardship brought on by the pandemic, Democrats apparently believe now is the time for a giant tax hike. If signed into law, their $3.5 trillion spending plan would amount to the largest expansion of the welfare state and government power since Lyndon Johnson’s ‘Great Society.’ Despite record inflation, a labor shortage, and anemic recovery numbers, as part of this plan President Biden and his allies in Congress are proposing the largest tax increase in modern American history. And a new analysis concludes that workers, retirees, and small businesses will bear the economic brunt of the proposal.
According to Congress’s non-partisan Joint Committee on Taxation (JCT), “Within 10 years of a corporate tax increase from 21 percent to 25 percent, 66.3 percent of the corporate tax burden would be borne by lower-and middle-income taxpayers with income well below $500,000,” the Committee said. This finding directly contradicts President Biden’s emphatic pledge that “anybody making less than $400,000 a year will not pay a single penny [more] in taxes.”
In fact, according to the same JCT analysis, middle-class Americans could face a tax hike by 2027 under Biden’s plan as a result of the expanded child tax credit.
The analysis is also pulling back the curtain on the dishonest promise that only the wealthy will face taxes increases. As Reason reports on the JCT estimate, by 2027, “the changes House Democrats are now proposing would result in higher taxes for nearly all taxpayers—even those making as little as $30,000 per year. Middle-class Americans earning between $50,000 and $100,000 would owe, on average, several hundred dollars in additional taxes.”
In other words, if the Democrats’ plans become law, Biden would be flagrantly violating his promise to the American people.
Biden would also be defying the overwhelming bipartisan consensus regarding current tax policy: According to NPR polling, 77 percent of Americans said their own personal federal income taxes are too high – a rare agreement that stretches across party lines.
If Biden is not careful, he may find himself repeating the mistakes of his recent Democrat predecessors. The pollster Douglas Schoen, who served as an adviser to President Bill Clinton, understands the political perils of tax increases ahead of midterm elections and sounded the alarm in a recent op-ed. “Democrats’ blowout midterm defeats in both 1994 and 2010 can be attributed in large part to their passage of massive spending and tax bills in the years prior,” Schoen noted.
Right now, Biden is trekking down an shockingly similar political path with his $3.5 trillion budget resolution. At the moment, there will not be a single Republican vote in favor of the package. Polls are also beginning to highlight that a majority of voters disapprove of Biden’s handling of the economy as inflation worsens and the recovery slows. When Americans learn about the large tax increase he has planned for them, it presumably will not help matters.
There is, however, one special group Democrats in Congress plan to cut taxes for: wealthy liberals in deep blue states. Democrats are vowing to repeal the state and local tax (SALT) deduction limits set forth by the TCJA. In a jarring example of hypocrisy, Democrats are going to quietly cut taxes for the rich while championing slogans like “the wealthy need to pay their fair share” in public.
According to a report released by the American Enterprise Institute, repealing the SALT cap in 2021 would cost $91 billion, and “over 50 percent of this reduction would accrue to taxpayers in just four states: California (25.1 percent), New York (16.8 percent), New Jersey (6.4 percent), and Illinois (4.2 percent).” Nationally, if the SALT repeal goes through, millionaires would receive an average tax cut of nearly $71,000, while individuals who make between $50,000-$70,000 would only receive a $23 tax cut.
One of the central focuses of the $3.5 trillion bill is raising taxes on businesses. House Democrats are expected to propose hiking the business rate to 26.5%, after President Trump and Republicans had reduced it down to 21% from 35%. Economists largely agree that such a policy would likely result in slowed economic growth, fewer jobs, and lower wages.
It would also result in American businesses paying a higher tax rate than the 25% rate businesses pay in Communist China. At a time when tensions between the two economic superpowers are at their highest levels ever, President Biden appears to be voluntarily surrendering America’s advantage and exporting American jobs in the process.
Although Democrats are determined to repeal the Trump tax cuts, the evidence is strong that the cuts lifted the economic prospects of millions of working class Americans. According to a report released on the two-year anniversary of the Tax Cuts and Jobs Act, “altogether, real disposable personal income per household [had risen] by about $6,000 since TCJA was signed into law.” This represented the largest increase in decades.
Beyond the tax hike on businesses, Democrats have been largely mum on where they plan to come up with the rest of the money for their $3.5 spending spree. House Ways and Means Chairman Richard Neal said the quiet part out loud when asked in an interview how his party intends to pay for the bill. “I’m likely to hold off on the payfors until we are at the altar,” Rep. Neal said, suggesting that he would keep the details secret until the very last minute because if Americans knew them in advance, he wouldn’t be able to pass the bill. It thus appears that Democrats intend to repeat their favorite legislative strategy: in the famous words of Nancy Pelosi from the Obamacare push in 2010, you “have to pass the bill so you can find out what’s in it.”
Pat Conroy is the pen name of a Washington, D.C. – based political strategist.