After forty long years, Reaganomics might finally be on its last leg.
On the campaign trail, Joe Biden promised to raise taxes on Americans making more than $400,000 a year.
Those familiar with Biden’s moderate past understandably interpreted that to be merely rhetorical.
After all, in 2019, he told donors at a campaign event at New York’s Carlyle Hotel that, if elected, “nothing would fundamentally change;” he would not “demonize” the rich.
A lot has changed since 2019.
In the midst of the worst pandemic in a century the previous administration allowed to get out of control, the highest level of racial unrest in 50 years, elevated threats of domestic terrorism, a climate crisis threatening all life on the planet, and 1920s-level income inequality, it appears Joe Biden is in a “Roosevelt moment.”
Surprising many progressives, the former “senator from MBNA” seems to be serious about that promise he made to raise taxes on Americans making more than $400,000 a year.
Two weeks ago, President Biden signed the “American Rescue Plan,” the $1.9 trillion coronavirus relief and economic stimulus package touted as the most progressive financial legislation since the 1930s that includes provisions to deliver $1,400 relief checks to most Americans (many of whom received them days after the bill’s passage), a tax credit increase for low- and middle-income earners to a maximum of $3,600 dollars annually per child under age six, food assistance, an additional $300 a week in unemployment insurance, hundreds of billions in subsidies to local and state governments, rent and eviction prevention, and COVID-19 vaccines and research.
Unlike the “rescue packages” passed during the Trump administration that only rescued the already wealthy, this one helps working class and middle-class Americans.
Now Biden is positioning to go even further.
White House press secretary Jen Psaki stated the president’s focus is ensuring the wealthy and corporations pay their “fair share” in order to fund national infrastructure priorities and other projects.
That means raising the corporate tax rate from 21 percent to 28 percent, increasing the top individual income tax rate and the capital gains rate for high-income earners, and increasing the estate tax, projected to increase federal revenues $2.1 trillion.
Of course, there’s the problem of Republican votes.
Not a single Republican voted for the American rescue Plan (despite extolling its benefits to constituents after it passed).
Assuming they will vote to increase taxes on the rich and corporate donors to whom their party has pledged fealty is naive.
Sen. Ben Cardin (D-Md.) said an infrastructure package would most likely have to go through the budget reconciliation process, meaning it could pass the Senate with a simple majority vote, not the 60 needed to circumvent a filibuster.
Senate Finance Committee Chairman Ron Wyden (D-Ore.) explained:
“Billionaires and mega-corporations have never done better, and ensuring they pay their fair share is critical to funding long-overdue investments in rebuilding our roads and bridges and transitioning to a carbon-free future.”
Frank Clemente from Americans for Tax Fairness added:
“If Biden were to put forward a major investment package that was financed by taxing the wealthy and corporations, there’s a good chance it would have as much popular support as his pandemic relief proposal.”
It’s about time.
The 651 richest billionaires‘ total wealth increased more than $1 trillion during the pandemic.
And it wasn’t like income was particularly equitable before.
On Wednesday, Senate Budget Committee Chair Bernie Sanders and other progressive lawmakers announced legislation to raise taxes on companies whose CEOs make at least 50 times more than the average worker.
The past 20 years, CEOs have boasted an average increase 350 times more than their employees.
According to the Institute for Policy Studies’ Sarah Anderson’s testimony to the Senate budget committee, in 2018, almost 80 percent of S&P 500 companies paid their CEOs more than 100 times the median salary of their average worker; nearly 10 percent had median pay below the federal poverty line for a family of four.
At the 50 publicly traded American corporations with the widest pay disparities, the typical employee would have to work at least 1,000 years to earn the CEO’s annual salary.
Billionaire wealth is 40% higher now than it was when this pandemic started. Meanwhile, millions are still unemployed, and families are struggling to keep a roof over their heads and put food on the table. We need a #WealthTax so we can invest in opportunity for everyone. pic.twitter.com/NZnjkw2Hlc
— Elizabeth Warren (@ewarren) March 7, 2021
Earlier this month, Massachusetts senator Elizabeth Warren introduced the “Ultra-Millionaire Tax Act,” which seeks to build on one of her signature presidential platform positions–create a wealth tax for high-net-worth households.
The bill proposes an annual two-percent tax on households and trusts boasting net worth between $50 million and $1 billion, and a three-percent tax on anything above.
It also includes a provision to grant an additional $100 million to the Internal Revenue Service (IRS), require a 30-percent minimum audit rate for those subject to the tax, and create a 40-percent tax on $50 million net worth for people who surrender U.S. citizenship to avoid paying.
During a White House briefing last week, Jen Psaki stated President Biden agrees with Sen. Warren that “middle class families are paying more than their fair share and those at the top are not doing their part.”
Under Warren’s plan, former Amazon CEO Jeff Bezos would owe $5.7 billion.
He is one of two billionaires whose wealth grew an average of $42 billion each week the pandemic bared down on us, more than $700 billion total since last March.
Tesla CEO Elon Musk would owe $4.6 billion and still have over $148 billion at the end of the year.
Bill Gates would have to pay $3.6 billion.
Facebook CEO Mark Zuckerberg, $3 billion.
Zoom Video Communications paid nothing last year while its profits increased more than 4,000 percent.
According to a recent Treasury Department watchdog report, the IRS failed to collect more than $38.5 billion from taxpayers earning over $200,000 a year, and more than $2.4 billion from those with incomes over $1.5 million.
For forty years this country slogged under a system promoting the discredited theory that if we give more to rich people money in the form of tax breaks, they will generously dole out more to the rest of us, and the country will be more prosperous.
This theory is aptly called “trickle down economics.”
It was a lie when it was first proposed and passed back during Ronald Reagan’s administration.
And it is a lit now.
Despite knowing it is a lie, Republicans perpetuate it because they understand doing the opposite will alienate them from the only constituency they care about–the wealthy and corporations.
Most people figured out the scam a long time ago.
Now Joe Biden is prepared to do something his two prior Democratic predecessors failed to accomplish–tax the rich.
But 28% up from 21?
We need to do better.
We need to return to the 90% top tax rate created under FDR and continued through the Eisenhower era that created the middle class and the most prosperous stretch of job growth and infrastructure development this country has ever known.
Even going back to President Lyndon Johnson’s 70% would be an improvement.
Joe Biden has always been in incrementalist.
28% is start, but we mustn’t stop there.
Image credit: Timothy Krause via Flickr
