July 28, 2022 | Reading Time: 4 minutes
Biden wants to fight inflation by soaking the rich, but centrists and the GOP are in the way
Catering to bloated oligarchs who want to hoover up wealth and power.
The press corps enjoys portraying Joe Biden as a centrist besieged by progressives. On one of a key economic issue, though, he’s on the side of the progressives, and his agenda is consistently sabotaged by those in his right.
That issue is raising taxes.
Low tax rates for the wealthy have exacerbated rising inequality since 1970. In that year, upper income households held 29 percent of national wealth. Middle income households held 62 percent. By 2018, middle income households had fallen to 43 percent. Upper income households had surpassed them with 48 percent of wealth.
Biden’s budget proposal released last March for fiscal year 2023 proposed raising the corporate tax rate from 21 percent to 28 percent. Biden also proposed a 20 percent minimum tax on households worth more than $100 million.
It’s not surprising Biden has embraced progressive ideas on taxation.
Taxing the wealthy is extremely popular.
Down the middle
A 2020 Reuters poll asked respondents if “the very rich should contribute an extra share of their total wealth each year to support public programs.” Sixty-four percent agreed, including 77 percent of Democrats and a majority 53 percent of Republicans.
It’s hard to find anything more bipartisan than that.
Nor was this poll a one-off. For 25 years, Americans have consistently said upper-income Americans pay too little in taxes.
There are solid policy reasons to believe that progressives, the public and the president are all correct. Taxes on the wealthy are too low. The US would benefit from increasing them.
A 2021 White House analysis found that the richest 400 American families paid an 8.2 percent tax rate. That’s lower than the average American, who pays 13.3 percent.
The disparity is in part because dividend and capital gains income are taxed at lower rates than other income. It’s in part because the wealthy can hire expensive lawyers and accountants to shield their wealth — by, for example, setting up offshore tax havens.
Low tax rates for the wealthy have exacerbated rising inequality since 1970. In that year, upper income households held 29 percent of national wealth. Middle income households held 62 percent.
By 2018, middle income households had fallen to 43 percent. Upper income households had surpassed them with 48 percent of wealth.
Extreme wealth inequality erodes social and political institutions. As philosopher TM Scanlon says, “If wealth is very unevenly distributed in a society, wealthy people often end up in control of many aspects of the lives of poorer citizens: over where and how they can work, what they can buy, and in general what their lives will be like.”
In the US, key media institutions are owned by billionaires like Michael Bloomberg, Jeff Bezos and Rupert Murdoch.
Billionaires are also contributing more and more to US elections.
In 2008, before the Supreme Court Citizens United ruling gutted campaign finance laws, billionaires contributed $31 million to federal campaigns. By 2020, according to a new estimate, those donations had increased by 40 times to $1.2 billion.
Those donations affect all of us.
A 2015 study infamously found that the Congress largely disregards the policy preferences of normal people, but that it is very influenced by the policy preferences of the very, very wealthy.
There’s no better example of this than taxes.
Sinema, Gottheimer and the right
Again, taxing the wealthy is very popular.
A supermajority of Democrats and a majority of Republicans agree that we should tax the pants off the super-rich.
The super-rich themselves, though, don’t want their pants or any other part of them taxed. They’ve persuaded Republicans to vote consistently to cut their taxes, despite their own voters’ preferences.
The Trump tax cuts notably cut billionaire taxes below those of the working class for the first time.
Democrats like Biden have been more willing to go against billionaire tax cuts. But the party also includes members who are reluctant.
A faction of House Democrats led by New Jersey representative John Gottheimer along with Arizona Senator Kyrsten Sinema came out strongly against tax hikes on the ultra-wealthy in the last month.
New York’s Jonathan Chait argued persuasively that this anti-tax faction was more responsible than West Virginia Senator Joe Manchin for killing Biden’s broad domestic agenda.
Soak the rich to fight inflation
Taxes are key to Biden’s agenda in part because taxes make it possible to pay for progressive programs.
Especially with inflation at record highs, the Congress is worried that pumping more money into the economy will push prices higher.
The main causes of inflation are the pandemic and the Ukraine war; spending is probably only a small part of the problem.
Still, inflation is a serious issue.
It’s reasonable to want to control the deficit. If only there were a way to do so while also spending what we need to fight serious problems like covid, global warming and child poverty.
Of course, there is a way to do so!
The wealthy have a huge amount of money.
You can tax them and use the money to help people by, for example, getting covid under control and reducing inflation.
But Sinema, Gottheimer and the conservative billionaire-loving caucus have taken tax hikes off the table. In doing so, they’ve prevented Biden from enacting a popular policy, and also kneecapped his entire policy agenda.
Progressives and Biden want to work for the public. But thanks to conservatives, we won’t fight climate change. We won’t fight covid. We won’t fight child poverty. All because every Republican, and key Democrats, would prefer to cater to bloated oligarchs who want to hoover up more and more wealth and power.
Biden and progressives hoped to use tax policy to make the US a more equitable, less diseased and less poverty-ridden country.
Instead, Sinema and Gottheimer have ruled that we shall address none of our crises. The super-wealthy will reward them with donations. To all the rest of us, they say, “let them eat dust.”
Noah Berlatsky writes about the political economy for the Editorial Board. He lives in Chicago. Find him @nberlat.