NEW YORK, March 3, 2019 (BSS/AFP) – Long out of favor in the United
States, the idea of taxing rich individuals and corporations to pay for
healthcare or to combat inequality is gaining ground among Democratic
politicians.
While the United States reveres free enterprise and is home to the world’s
largest number of billionaires, such tax proposals have been gaining traction
in political circles in recent weeks.
More than one Democratic contender in next year’s presidential elections
are campaigning on some plan to tax the wealthy.
And they have been encouraged by famous billionaires such as Bill Gates
and Warren Buffett, the world’s second and third wealthiest people, who worry
about America’s severe wealth inequality.
Vermont’s left-leaning Senator Bernie Sanders was among the first in the
recent wave. During his 2016 presidential campaign he called for higher
federal income taxes to pay for free college tuition and universal
healthcare.
Massachusetts Senator Elizabeth Warren has proposed a two-percent wealth
tax starting at $50 million in earnings. New York Senator Kirsten Gillibrand
is calling for a levy on financial transactions, and Sanders says
inheritances should be taxed up to 77 percent.
With the Democrats now in control of the House of Representatives, the
undisputed media star of the freshman class, Alexandria Ocasio-Cortez, is
leading the charge: she has proposed a tax of 70 percent on any income over
$10 million to help pay for a proposed “Green New Deal” to de-carbonize the
US economy and help prevent catastrophic climate change, while offering
universal healthcare and guaranteed employment.
This so-called marginal rate of 70 percent is not unprecedented in the
United States, but was last at that level 1981. The current top marginal tax
rate is 37 percent.
Raising corporate taxes is another Democratic priority, a subject inflamed
by the recent controversy over Amazon, which has reported no federal income
tax expenses for the past two years. That has stoked debate over highly
profitable companies that do not pay into government coffers.
Some Republicans have pushed back, with outspoken and media savvy Ocasio-
Cortez drawing the most fire.
Grover Norquist, an anti-tax activist who has long pushed Republican
lawmakers to pledge never to raise taxes, warned in January against soaking
the rich, saying such taxes “always slip down to hit the rest of us.”
But Joseph Thorndike, a historian specializing in US tax policy, said a
reversal of the post-war trend of cutting taxes is within sight.
– ‘Social tensions’ –
“Something is happening here,” he said. “We are beginning to have a
discussion about that that we haven’t had since the 1960s or even the 50s.”
Top marginal tax rates in the United States were very high following World
War II, maxing out at 94 percent. They began to fall in the 1960s and were
slashed again under President Ronald Reagan in the 1980s.
In late 2017, Donald Trump and the Republican majority in Congress cut
corporate and personal income tax rates, despite unanimous Democratic
opposition which denounced the tax overhaul as a giveaway to the rich.
Trump, himself a billionaire, has attracted widespread scorn for refusing
to disclose his own income tax returns, and accusations that his family
maintained its wealth by evading taxes, an accusation he denies.
Why has the debate changed?
Yawning income gaps are one reason, Thorndike said.
“People are willing to tolerate rich people getting richer as long as
middle class people are also doing better,” he said. “When the middle and
laboring class is stagnating, that creates social tensions.”
Trump himself may have been catalyst.
While most major changes in US tax policy came in times of crisis — wars
or deep recessions — Trump’s unconventional presidency could mark “a sharp
enough break” to bring about change, Thorndike said.
A Morning Consult poll conducted late last month for Politico found 74
percent of voters were generally in favor of higher taxes for the rich, while
73 percent favored this for corporations.
Furthermore, 90 percent believed such tax revenues should go to pay for
healthcare or infrastructure.
But this apparent consensus masks significant divergences between
Democrats and Republicans, and the tax issue remains very sensitive, analysts
say.
The modest changes are sometimes a hard sell for the public while the
“anti-rich” rhetoric of some Democrats could alienate certain voters,
Thorndike said.
But Kenneth Scheve, professor of political science at Stanford University,
said “there is a set of voters and politicians who are trying to innovate and
respond in ways the country has not traditionally responded to.”
“For the Democratic primaries in 2020, this is going to be a key feature
of the debate,” he said.