In recent weeks, Democrats have offered a variety of new tax proposals. Those include:
Federal tax increases: Senator Bernie Sanders introduced an annual 5% wealth tax on billionaires that would bring in $4.4 trillion in revenue over the next ten years, and Senator Elizabeth Warren reintroduced her Ultra-Millionaire Tax—a 2% annual wealth tax on net worth above $50 million—that is projected to bring in more than $6 trillion in revenue over the next ten years.
Federal tax cuts: Senator Chris Van Hollen proposed a $1.5 trillion middle-class tax cut offset by a new surtax on income over $1 million, while Senator Cory Booker introduced a far larger proposal that would offer tax cuts to a broader set of families, including those farther up the income spectrum.
State tax increases: California unions are offering a ballot initiative that would impose a retroactive, one-time wealth tax on the state’s billionaires, and Washington State enacted a new 9.9% tax on income over $1 million.
State tax cuts: California gubernatorial candidate Katie Porter proposed eliminating state income taxes on income under $100,000, while Georgia gubernatorial candidate Keisha Lance Bottom proposed eliminating state income taxes on teachers.
Yesterday, I had the chance to talk with Perry Bacon at The New Republic about both the economic and political merits of these ideas. The video of the full conversation is at the top of this post.
As I said to Perry in our discussion, this flurry of activity shows Democrats grappling with a basic question: what do we think taxes are for?
It may seem like an elementary question, but I can think of at least four answers:
To fund government spending: This is the most obvious answer. The federal government—and with more restraints, state governments—can borrow money to finance their operations. But additional tax revenue reduces the amount they must borrow. If the goal of a new tax is to replace new borrowing, then the operative question is whether it is better to impose a new tax and bring in $X in revenue rather than needing to borrow $X. And the opposite question applies for a tax cut: is it better to cut $X in taxes if that means needing to borrow $X?
To give people a stake in their government: In response to the Booker and Van Hollen tax cuts, a number of left-leaning commentators have noted that substantially reducing the number of people who pay federal taxes gives fewer people a stake in the government itself. For example, here’s my former White House colleague Bobby Kogan:
The fact that people pay dedicated taxes for Social Security and Medicare, Kogan said, makes those programs politically untouchable. Promoting the idea that only the super-rich should pay taxes will make it harder for Democrats to promote an agenda that materially benefits the American people.
“The point of taxes is to help fund a society, to fund things that make the country better and less unfair,” Kogan said.
In this view, we should want a broad tax base—albeit with a progressive structure—so that people feel invested in the government. As I said to Perry in our talk, I am somewhat skeptical of the idea that paying taxes creates this kind of connection, apart from taxes that go specifically towards a particular program, like payroll taxes for Social Security. I am not sure paying federal income taxes to the US Treasury, which then goes to everything from buying fighter jets to offering nutrition assistance, really makes people feel more invested in government programs than they otherwise might be.
To discourage undesirable conduct: High government taxes on cigarettes and alcohol and gambling are intended in part to discourage those behaviors. Many economists favor a carbon tax as a way to discourage emissions. In these cases, the revenue these taxes bring in is almost secondary—the goal is mostly to deter the undesirable behavior, even if that means the government brings in less revenue than it otherwise would if it imposed a smaller tax. There is a strain of this philosophy behind some of the recent taxes on the wealthy. Senator Sanders and some other wealth tax advocates note that massive accumulations of wealth are dangerous because they are incompatible with democracy, and part of their goal is to at least slow the pace at which the ultra-rich accumulate wealth.
To punish or reward certain groups of people: Every tax policy has winners and losers. But there are certain proposals that appear motivated largely by rewarding or punishing a particular group—like the proposal to exempt teachers from state income taxes. In some ways, this is the flip side of the idea that taxes are a way of helping people feel invested in their government. In this view, taxes are punishment, and the government can choose to inflict this punishment on some disfavored groups while generously exempting favored groups from the same treatment. As I said to Perry, this is the view I find most dangerous because it fundamentally reaffirms an essentially Republican framing of taxes.
While Democrats debate these new proposals and introduce others, I hope they also take a step back and think about what they hope to accomplish with the tax code. Republican messaging on taxes is easy: they think taxes are bad and should be lower. Democrats need to make a more nuanced case, but they won’t be able to unless they can articulate what they want out of our tax code in the first place.
Comments
Nothing yet. Say the first thing.
Sign in to join the conversation.