The Democratic Party is all about taxes these days. These words sound acclaim or rebuke – it depends on who’s speaking.
Yet two party souls, heroes or patsies – that depends, too – are blocking the passage of a potentially historic package of tax increases.
For our consideration today, the tussle over corporate and individual income taxes. Senator Kyrsten Sinema, D-AZ, is resisting the aggressive mass movement of her own party, which planned to boost these taxes as part of Budget 2022. Senator Joe Manchin III, D-W.VA, purportedly appalled by the size of the budget, is balking, too.
President Joe Biden proposed raising the top individual income tax rate to 39.6%, the same as before President Trump’s tax reform cut it to 37%. Joe has spurred Congress to boost the corporate rate from 21% to 28%, including a 15% minimum tax on corporate book income – the latter part still looks to come true.
Yoked to Big Budget, the White House has created a curious meme: ‘It won’t cost a cent’. I suppose they mean the price will be covered by new taxes and excise, with limited borrowing. A key prop for their case is ‘dynamic sourcing’ – this means when the economy booms, tax-take goes up. The idea stems from old Trump and his team, and it’s curious to hear Democrats endorsing it. Curious, if you’ve never been to Washington.
Raising these rates seemed a done deal. The idea is simple, when floated in tandem with proposals to end the step-up in basis or slap a carbon tax on industry – both, now off the table. White House sources are surprised that Senator Sinema won’t back some kind of rise, and she is not commenting on her whys or wherefores – curiouser by the day, our DC.
Why all the secrecy? It’s the budget itself, and no one wants to say it out loud: $3.5 trillion in worthy projects, and graft – why sugar-coat it? Senator Sinema wants to slice the rank fat before she’ll OK it. Cutting tax funding, thereby forcing her comrades to choose between this-program-and-that, is one way to do it.
Democrats need Sinema and Manchin’s assent, because the Senate is split fifty-fifty. Vice President Harris, as Senate president, casts the deciding vote on a tie. When the Budget comes to a vote, every Republican will oppose it, no matter its contents – it could provide funding to place a statue of Ronald Reagan in every McDonald’s worldwide, and they’d hit ‘thumbs down’.
When it comes time to vote, every last Democrat must be on board and VP Harris best not be vacationing. Budget approval is slow as molasses today, but don’t get caught napping: it could spring up for passage as alarmingly as that pugilistic kangaroo fugitive who escaped the Washington zoo – I’ll tell you the story one day. Old school DC was a bucket of strange.
These two items were intended to raise nearly a trillion dollars over ten years. If income and corporate tax boosts are off the table, what might Democrats do to cover the revenue shortfall?
First, recall the weighty planks of Joe’s original agenda that are still firmly nailed down. The aggressive pursuit of US companies’ foreign earnings (to be taxed at 21%) and a 15% minimum corporate tax are both live and kicking.
Forget thee not: the ‘enhanced enforcement’ funding for the Internal Revenue Service, $80 billion worth, is ready to ferret cheats among corporates and those suddenly unloved billionaires. Senator Bernie Sanders, I-Petrograd, proposed taxing the latter out of existence, as silly a notion as you’ll hear, swept onto the chamber floor like crumbs of stale proletarian bread.
Hang on: here it comes again into the Senate chamber, set on a silver tray, like poor St. John’s head. That laughed-at idea is again what’s for dinner.
This alarming proposal calls for taxing unrealized capital gains in liquid assets. It is aimed squarely at billionaires who earn at least $100 million for three consecutive years. Will Bernie’s guillotine get built, after all?
This proposal would affect around 700 citizens – the New York Times tells me this is 0.0002 percent of all taxpayers – yet Hill Democrats hope to gain $20 billion per year. One Times reporter called the proposal “groundbreaking,” and that’s what I fear. Once the billionaires are tapped out, who will be next?
Elon Musk tweeted: “Eventually, they run out of other people’s money, and then they come for you.” I don’t expect sympathy for Elon as such, but his warning rings true. At some point, the newly established principle of taxing unrealized gains could be applied to millionaires; once they are tapped out, the retirement savings of average Americans might fall in the crosshairs. Sound mad? Public opposition is already gelling.
House Democrats are questioning the plan on grounds of constitutionality and practicality. What’s going on here? It sounds like the party is playing hardball with Sinema and Manchin. A mild increase in personal and corporate income taxes might become a sensible compromise, given the wild alternative.
I expect more ‘creativity’ from Congressional Democrats in the next weeks. Democrats are even toying with cutting federal spending, of all radical acts. As an example, they propose allowing Medicare to negotiate prices with drug manufacturers – I’m shocked they’re not already doing so. Hopefully, more administrative measures like this one, which could put billions in government coffers without raising anything, will come up for debate.
Whatever they do, I don’t see an easy way forward. Word from the Hill: $3.5 trillion is already a dream. But don’t expect Democrats to give in just yet. There’s plenty of ways to skin a billionaire.
Sinema and Manchin are brave, if nothing else. Their stand recalls the 300 Spartans of history and cinema (my ancestors likely fought at Thermopylae, though I’m not certain for which side). Whatever you think of them, they’re standing on principle, a notion we thought was forgotten in Washington.
Mind you, I hear reports of Senator Sinema’s ‘secret, private office’ in the Capitol basement, where a dirty political war is in session. This is why we, like the Spartans, create myths: right now, the two Senators sound heroic. Why make the tale sordid with talk of subterranean bickering, nail pulling and mare trading? Let’s call them patriots and move on – to consider the next tax proposal, coming up soon.