Democrats Need to Find Their Voice on Tax Reform
After crashing and burning in their quest to repeal Obamacare, Republicans have turned to their perennial passion: corporate and personal tax cuts. President Donald Trump has promised “the biggest tax cut in history,” and the GOP is ready to help him deliver.
According to early outlines of various Republican plans, the party will push for—wait for it—tax cuts skewed to the very rich along with deep cuts in corporate taxes. Trump wants the corporate tax rate to go from a nominal rate of 35 percent to 15 percent.
The Republican sales pitch invokes notions of magical tax-cut created growth, competitiveness, and other fantasies that will supposedly “cover” the cost of the tax cuts—or not.
The Trump administration has at times floated plans that would simply enact deficit-financed tax cuts for 10 or even 20 years, which would in turn put tremendous pressure on safety-net programs.
Global corporations are also looking to avoid the bulk of the taxes owed on profits reported abroad, while ending any taxation on such profits in the future. The intended result of this so-called “territorial” tax system—in addition to the cash benefits for contributors and favored interests—will be deepened public austerity, with growing pressure for cuts in Medicare, Medicaid, Social Security, and education.
Democrats, their spines stiffened by massive popular mobilizations, displayed remarkable unity and grit in opposing the Republican push to repeal and replace Obamacare. But how will Democrats respond to this new grotesquerie?
Senate minority leader Chuck Schumer, who has worked tirelessly to shepherd his vulnerable flock of Senators, acted quickly. On Tuesday, he joined with Senator Ron Wyden, ranking Democrat on the Senate Finance Committee, to release a letter signed by 45 of the 48 Democrats in the Senate that set forth Democratic parameters on tax reform.
The three senators who did not sign—Heidi Heitkamp, Joe Manchin, and Joe Donnelly—are all up for reelection in states that Trump won. Their abstention makes them leading Republican targets for the coming Senate debate.
The letter invites Republicans to join in a bipartisan tax-reform effort, and lays out the Democratic conditions for cooperation. No tax cuts for the top 1 percent. No increase in burdens placed on the middle class.
No “deficit-financed tax cuts, which would endanger critical programs like Medicare, Medicaid, Social Security, and public investments of the future.” And, of course, it demands working in regular order, rather than invoking arcane budget-resolution procedures that would enable Republicans to pass a measure with Republican votes only.
The virtual unity of senate Democrats is impressive and important. But there is one glaring omission: Democrats did put corporate tax cuts inside their red line. The letter does say that “Deep cuts to our corporate, individual, and other tax rates are very costly,” but notably does not pledge to fight corporate tax reductions.
This omission cuts directly against the recently released Democratic “Better Deal” platform, in which the party railed against an economy where rules “are rigged” against working Americans by “special interests, lobbyists and large corporations.”
Democrats, the document confessed, “have failed to articulate a strong, bold economic program…. We also failed to communicate our values to show that we were on the side of working people, not the special interests. We will not repeat the same mistake.’”
Sensible tax reform would be anchored to the reality that inequality has reached obscene extremes. Billionaires are paying lower tax rates than teachers. Hedge-fund investors pay lower rates than their plumbers.
And corporate profits are at record levels as a percentage of GDP, but revenues from corporate taxes are lower than the industrial-world average as a percentage of federal income. Global corporations like Apple and Pfizer and General Electric book literally trillions of profits as earned abroad to avoid paying taxes. Loopholes and tax havens and dodges—the inventions of corporate lobbyists and accountants—benefit special interests, while small businesses get hit with the full load.
The public understands this. Poll after poll demonstrates that the American people are far more sensible about taxes than the vast bulk of politicians. The tax reform that gains the most support involves big corporations and the rich paying their fair share of taxes. Republican calls for lowering tax rates across the board and on corporations garner far less interest.
The public is already dubious about the argument that tax cuts to the rich and corporations will lead to jobs. A June survey by Hart Research for Americans for Tax Fairness (which is not yet a public document) showed that, by a remarkable five-to-one ratio, voters prefer that revenue raised from closing loopholes be used to pay for public investment in infrastructure, health care, and education (84 percent), not to lower corporate tax rates (which gained only 16 percent support). Six in 10 Americans would support taxing companies that stash profits abroad as a priority for reform.
So why aren’t Democrats as bold as the majority of American voters? Or, as Frank Clemente, director of Americans for Tax Fairness gently puts it, why haven’t Democrats “found their voice” yet on taxes?
This isn’t complicated: Money talks. Corporations and the rich get huge returns on investment by rigging the rules of the tax code. In the tax battle, they deploy legions of corporate lobbyists, lavish campaign contributions, massive independent expenditure campaigns, and volumes of bogus studies to sell legislators on the notion that tax cuts for the rich and the big corporations are somehow more than yet another rip-off.
This has clearly influenced Democrats as well as Republicans: Last October, when Schumer was anticipating becoming majority leader under President Hillary Clinton, he told CNBC that a first order of business would be a giant corporate tax cut, albeit one used to fund infrastructure projects.
The emerging populist movement must challenge the limits of this debate. The “People’s Budget” put out by the Congressional Progressive Caucus laid out many sensible tax reforms: hiking rates on the rich, raising estate tax rates on bigger estates, shutting down the most egregious tax dodges, levying a tax on financial speculation. These policies generate revenue, curb growing inequality, and ensure sufficient resources to sustain long term investment in rebuilding America and expanding the social contract.
The popular populist leaders—Senators Bernie Sanders, Elizabeth Warren, and Jeff Merkley, along with House Representatives Mark Pocan and Raul Grijalva, among others—need to take to the stump on these issues. The growing progressive infrastructure should do more than simply resist the Republican plans. It should mobilize to demand that the rich and corporations pay their fair share of taxes, not escape even more of the burden.
Liberal billionaires and multi-millionaires like the Democracy Alliance donors who sank $1.7 billion into the Clinton campaign ought to be funding independent expenditure campaigns to go after any politician of either party who supports giving even more tax breaks to the rich and the big corporations. The Koch network already kicked off a massive spending campaign to push for tax “reform,” and it must be countered.
The public already gets that the game is rigged. Voters are already skeptical about what corporate front groups are trying to sell them. Democrats could turn the debate on taxes on its ear—and add to their own threadbare credibility—but only if the pledge to be big and bold and clearly on the side of working people applies when it comes to properly taxing corporations and the wealthy, and putting the revenue to beneficial public use.
Senate majority leader Mitch McConnell has already scorned the Democratic offer of bipartisan cooperation. Republicans suggest they will mark up a bill in September, and, after passing a budget with reconciliation instructions, drive it through the House and Senate by December.
Most observers think this an unlikely timetable for what will be require a lot of heavy lifting. In any case, the push for another raid on the Treasury by the big corporations and the wealthy is gearing up.
We know Republicans are in the bag. The question for Democrats is whether they will meet their own test.
First published at The Nation.
