by Gerald E. Scorse / November 27th, 2021
Amazing but true: One of the best ideas to pay for Build Back Better came from Senator Joe Manchin (D-WV).
Yes, Manchin is a big reason that president Biden’s landmark bill is taking forever to get through Congress. Yes, Manchin personally vetoed a tax on billionaires that passed muster with everybody except, well, billionaires. “I don’t like the connotation,” he said, “that we’re targeting different people.”
Manchin wouldn’t take that route. Instead, in words that go to the heart of tax fairness, he called for all hands on deck: “I’m supporting basically that everyone should pay their fair share.”
No, everyone isn’t paying their fair share when billionaires can game the system and pay little to nothing. Just as important and just as inequitable, there’s also no fair-sharing when the vast majority of upper-income Americans are walled off from any tax increase.
President Biden long ago laid down a no-new-taxes threshold of $400,000. That’s a big number, and it can hamstring a president with big safety net plans. It seriously shrinks the tax base, giving a free pass to millions of the most affluent families in America.
That $400,000 is roughly six times the median household income in the U.S. If taxpayers making that kind of money were asked to help pick up the tab, the Democrats might have avoided cutting back on universal pre-K, or family leave, or anything else.
Biden isn’t the first president to create a tax comfort zone for the affluent. President Obama did the same, and his top line was $250,000; Hillary Clinton chose the same number when she was campaigning to succeed him.
The idea may be good politics but it’s risky policy, and the risks may have gotten the upper hand.
“I personally think the president made a mistake by having this red line that nobody below $400,000” would pay any more in taxes. The words came from Bill Hoagland, senior vice president of the Bipartisan Policy Center in Washington, D.C. He delivered them to a fellow tax expert, the Tax Policy Center’s Howard Gleckman, during one of the Center’s virtual sessions on fiscal policy.
Hoagland argued strongly that everybody should be pitching in: “This is a social welfare system that we’re talking about, and it shouldn’t be limited to just a select few that have to bear the burden.” Gleckman set the stage, lauding Europe’s “robust social safety nets” financed by taxes that everybody pays.
This doesn’t mean, of course, that those with the most shouldn’t be targeted at all. President Obama was able to reduce inequality for the first time in years with tax levies on top-tier incomes. The current budget bill no longer includes a tax aimed just at billionaires, but it does call for increases on the top 1 percent.
The hikes make sense, but they don’t really address our saddest and most basic divide: We’ve lost our sense of the common good, of the plain truth that we’re all in this together.
We’re not in this together when “people with healthy six-figure incomes…convince themselves that they are somehow in the same economic boat as ordinary Americans, and that it is just the so-called super rich who are to blame for inequality.”
The quote is from a Richard Reeves op-ed that previewed his 2017 book The Dream Hoarders. In the book and ever since, Reeves has laid out the case that it’s the top 20 percent—not the top 1 percent—who have done the most to shred America’s social fabric and reinforce inequality.
We’re not in this together when those “healthy six-figure incomes” (Biden’s $400,000, Obama’s $250,000) become the yardstick for tender loving tax treatment.
Lastly, we’re not in this together when the biggest single cost in Build Back Better could well be a tax break for the affluent—the repeal of the $10,000 limit on the deduction of state and local taxes (SALT). Its two-year price tag of $180 billion dwarfs the costs of any of the bill’s social welfare benefits, and the money would go overwhelmingly to people who don’t need it.
It’s hard to imagine anything more regressive. It flies in the face of what Joe Manchin reminded us: everybody should be paying their fair share.