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The Democratic Strategist

Political Strategy for a Permanent Democratic Majority

Bold Tax Justice Reform Is Best Democratic Response to GOP Class Warfare

The following article by Jack Metzgar is cross-posted from Working-Class Perspectives:

When Trump Republicans passed the historically unpopular Tax Cuts and Jobs Act, they continued a 3-decades long GOP effort to reshape the tax code in ways that are hard to reverse.  Relying on what political scientists call path dependency, Republicans have steadily moved us toward a tax system that increases inequality and that makes it harder and harder to sustain most of what the federal government does to fulfill its Constitutional responsibility to “promote the general welfare.”   What they have done would be more appropriately titled the Consolidating the Oligarchy Act.

Republicans are betting that a reasonably strong economy and a series of small tax cuts for almost everybody in 2018 will make them more popular going into this year’s mid-term elections.  If Democrats want to win this fall, they cannot be satisfied to merely attack the GOP’s “tax reform,” the vast majority of whose benefits go to corporations and the top 1% to 5% .  They need their own bold tax fairness plan that frankly taxes the rich to pay for a wide variety of government activities that majorities of the public firmly desire – everything from a long-term modernizing infrastructure program and increased funding for education and veterans to deficit reduction and real lower-income and middle-class tax cuts.  Such a program would be wildly popular (see recent Gallup and Pew surveys), with the potential to win back millions of white-working-class swing voters as well as to regain huge margins and turnout among working-class people of color.

Simply removing the tax code’s bias that favors investors over workers, consumers, and home-owners would provide enough revenue ($300 to $500 billion a year) for a progressive government to really make a difference in working people’s lives and prospects.  And unless we do that, the government will increasingly lack the resources to address any of our problems that cost money to solve, which is almost all of them.  What’s more, systematically advocating how to unrig the tax code would provide Democrats a rich opportunity to reveal how American oligarchs have been buying and renting our government to suit their purposes – especially when contrasted with the Trump GOP’s hypocritical insistence that what they have done is a “middle-class tax cut.”

Pelosi-Schumer-Clinton Democrats will not put forward such a tax-fairness program, because they’re afraid of losing wealthy donors and affluent suburban white voters.  Progressive Dems, on the other hand, have developed such a program over the past several years (see here, here and here), but rather than highlighting tax fairness, they focus on raising revenues as ”pay-fors” for the progressive programs they want to enact.  This may be practical and even honest, but it isn’t the right strategy — not this year and probably not for the next several years.

The negative public perception of the Trump Tax Cut as a give-away to corporations and the rich, along with Trump’s historically low approval ratings, is a once-in-a-lifetime opportunity to make raising government revenue into the class-war social justice issue it deserves to be.  What’s more, no single action of the President more concretely illustrates the distance between his rhetorical populism and his actions to enrich himself and his fellow oligarchs. To take advantage of this unique moment, progressive Democrats need to lead with moral arguments about tax justice and pound away at the gross class bias in the very structure of our tax code.  This before addressing the complex economic and fiscal issues involved, where progressive analysis and argument are also well-developed and very sound.

The signature plank in a tax justice platform would be equalizing the tax rates for earned and unearned income, which both the Congressional Progressive Caucus’ People’s Budgetand Bernie Sanders’s comprehensive reform plan propose to do.  Currently, people who work for a living pay higher marginal rates than people who get their income from investing rather than working.  Most people do not know this, and when they find out, they are outraged.  In a country where working hard is something like a national religion, especially among the working class of all colors, a tax code that disadvantages work is a moral abomination.  Taxing investment income (capital gains and dividends) at the same rates as income you work for would produce a lot of revenue, but the more powerful political point is how the current code dishonors work and disdains workers.

Progressive Dems also advocate a federal sales tax on the purchase of stocks and bonds (usually called a “financial transactions tax” or FTT).   A potentially huge revenue raiser and, therefore, a key “pay-for,” an FTT also brilliantly illustrates class bias in that consumers pay hefty sales taxes for clothing, shoes, and meals at restaurants, but investors currently pay nothing when they buy stocks and bonds.

Finally, there is the beginnings of a policy discussion about a “wealth tax.”  It is usually not noted, however, that we already have a wealth tax at the local level where home-owners pay annual taxes on property.  What is untaxed is wealth in the form of financial assets.  Again, investors are given a free pass.  As with sales taxes, they not only do not pay their fair share, they don’t pay any share at all.   Proposals for a “wealth tax” are not nearly as well developed in legislative language as the previous two ideas, but this concept provides a useful talking-point for Dems because it illustrates so concretely how the tax code is systematically rigged not only against workers and consumers, but also against “middle-class” home-owners.

The especially transparent class bias of the Trump Tax Cut also provides a unique opportunity to advance other progressive goals.   Given the huge tax cuts for corporations, a $15-an-hour minimum wage just got more affordable for businesses large and small.  Likewise, Republicans can no longer label various mandates on businesses – everything from paid family leave, sick leave, and vacations to the wide array of employer mandates in Ohio Senator Sherrod Brown’s “Plan for Restoring the Value of Work in America” – as the onerous job killers they were before corporate bottom lines were refreshed with mounds of cash.  Likewise, the Act left a lot of special-interest loopholes in the corporate code, and even added some, that Democrats can and should go after.

Most political strategists agree that Dems should not run on a simple isn’t-Trump-terrible program in the 2018 mid-terms.  At least 60% of voters in 2016 viewed our stable genius unfavorably then and knew he was dishonest, untrustworthy, and unqualified to be president, but nearly 1/5th of those voters voted for him anyway!  To win governing majorities, Democrats need to stand for a compelling program that offers hope and change again.  An us-against-the-oligarchs message focused on tax justice has a double advantage in that regard.  It is a unifying values message that has the potential to rally the bottom 80% or 90% across lines of race, gender, and class.  And if successful, such a program would provide the revenue needed to reverse the ongoing American carnage in working-class life that is shared — unequally to be sure — by workers of all races, genders, religions, regions, and national origins.

The Democratic Party does not seem well-prepared to advance such a vision, but the vacuity of mainstream Dems’ Better Deal platform, combined with the spectacular hypocrisy of the Trump GOP’s “middle-class tax cut,” opens the door wide for progressive Dems to offer the kind of realistic, compelling program that has been articulated by Bernie Sanders and the Congressional Progressive Caucus.  The technical complexities of our tax code hide a vicious class war, and Donald Trump has just put a loathsome human face on that war.  Of all the rigged systems our oligarchy has in place, unrigging this one could rally large majorities and then provide the resources to turn the wheel of fortune toward America’s struggling working and threatened middle classes.

One comment on “Bold Tax Justice Reform Is Best Democratic Response to GOP Class Warfare

  1. pjcamp on

    You are aware that Democrats want to get funding from the same corporations? That’s why the Obama administration decided no one had committed fraud in 2008.


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