9/21/2020 Gale Academic OneFile - Document - Trillion-Dollar Pledges Cement Democrats' Bet on Taxing Rich

Trillion-Dollar Pledges Cement Democrats' Bet on Taxing Rich

Author: Jim Tankersley

Date: Nov. 3, 2019
From: The New York Times
Publisher: The New York Times Company
Document Type: Article
Length: 1,816 words
Full Text:

A 'Medicare for all' proposal would push the boundaries of taxing corporations and the rich to fund expanded
government programs.

WASHINGTON -- Three years after President Trump rode a wave of populist anger into office, some of his top
Democratic challengers are calling for a fundamental reordering of American capitalism, arguing that voters will
embrace bold plans to reverse decades of rising inequality by raising taxes on corporations and the rich.

The $20.5 trillion proposal for ''Medicare for all'' released by Senator Elizabeth Warren of Massachusetts on
Friday is the most prominent example of how a party that once bet on centrist economic policies to win elections
is moving toward far more ambitious efforts to redistribute wealth and expand the government's role in the
economy.

In doing so, Democrats are trying to push the boundaries of how much a country can rely on a sliver of high-end
investors and other wealthy citizens to fund widely used social programs and bankroll other services
traditionally paid for by individuals.

Ms. Warren, who is leading in many polls, has proposed a wealth tax on billionaires, along with new taxes on
corporations and financial transactions like selling or buying stocks. Senator Bernie Sanders of Vermont has
embraced raising taxes on billionaires and corporations, as well as on the middle class, to fund universal health
care, free college, clean energy and other government programs. Another Democrat who is climbing in the polls,
Pete Buttigieg, would reverse Mr. Trump's corporate tax cuts to pay for a less expansive and expensive health
plan and has also expressed support for higher taxes on the rich.

Liberal champions of these proposed shifts say they would restore economic fairness and security to millions of
Americans who have fallen behind as the economy tilted in recent decades to favor the very rich. Conservative
critics say they would cripple business investment, slow economic growth and dissuade future entrepreneurs.

While those objections may have held sway in the past, support for economic programs that redistribute wealth
has grown along with voters' increased anger toward big business and a sense that companies and the rich should
pay a larger share of taxes. The top 1 percent of Americans held 29 percent of the nation's wealth in 2016,
according to the Federal Reserve, more than the combined wealth of the entire American middle class.

The proposals are a sharp departure from the recent past, both for Democrats and for the terms of political
debate in a nation that for several decades rewarded candidates who promised to reduce taxes and scale back
government's role in the economy. While Democratic candidates often tiptoed around tax increases on banks or
the rich, both Ms. Warren and Mr. Sanders have made tax increases a centerpiece of their campaigns.

Ms. Warren's Medicare for all plan by itself includes $20.5 trillion in new government spending over a decade.
The plans include direct repudiations of some policy initiatives of President Barack Obama, who sought to
reduce corporate tax rates to bolster competitiveness for American businesses, and whose health plan tried to
enhance, rather than replace, the existing private health industry.

Supporters say the candidates are reacting to voter frustration over sluggish wage growth and spiking costs
across working families' lives, including housing, child care, schools and health care, along with concerns about

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inaction toward climate change.

''I think people don't care as much about taxes as they care about how their life is going,'' said Betsey Stevenson,
a University of Michigan economist who helped develop a list of possible tax increases and spending cuts that
Ms. Warren drew on to fund her health care proposal.

''Our climate problems have only gotten worse,'' she said. ''Corporate greed has only gotten worse. We've
continued to see the gains go disproportionately to the top. And we've continued to see the bottom 90 percent --
it's just not all working for them.''

Those concerns have been exacerbated by Mr. Trump's economic policies, including a $1.5 trillion tax cut,
which delivered its biggest gains to corporations and wealthy Americans, and has yet to produce the sustained
investment boost and accelerated wage gains for middle-class workers that the administration promised.

In the decade-long recovery from the Great Recession, real incomes for the top 1 percent of American
households have risen 38.5 percent, according to research by the economist Emmanuel Saez at the University of
California, Berkeley. Incomes for the bottom 99 percent grew 10 percent over that same time frame.

Still, not every Democrat is embracing the type of aggressive redistribution that Ms. Warren and Mr. Sanders
propose. Former Vice President Joseph R. Biden Jr. wants to reverse Mr. Trump's tax cuts for corporations and
the ''super wealthy'' and raise taxes on investment gains for multimillionaires. But he has criticized Medicare for
all, proposing instead to expand Mr. Obama's Affordable Care Act, in part by giving Americans the option to
buy into a government health plan -- all funded by increased tax rates on capital gains.

Representatives for Mr. Biden said Friday it was not possible for Ms. Warren to pay for her plan without raising
middle-class taxes, a criticism she brushed off while speaking to reporters in Des Moines.

''If anyone wants to defend keeping those high profits for insurance companies and those high profits for drug
companies, and not making the top 1 percent pay a fair share in taxes and not making corporations pay a fair
share in taxes,'' she said, ''then I think they're running in the wrong presidential primary.''

But conservative economists who have long argued that tax cuts are the best fuel for economic growth and rising
wages said Friday that Ms. Warren's planned tax increases on corporations would rebound to hurt the middle
class -- along with everyone else.

''This would be pretty dramatic,'' said Nicole Kaeding, an economist who is the vice president for policy
promotion at the National Taxpayers Union Foundation, a Washington nonprofit that promotes lower taxes.

''Capital drives the U.S. economy,'' she said. ''Investment increases productivity, it creates jobs, it raises living
standards and wages. Slowing or handicapping investment would negatively affect everyone in the United
States.''

Ms. Warren's plan would move the costs of the entire American health care system, which she pegs at just under
$52 trillion over the next decade, onto the books of the federal government. She says that would reduce overall
health spending and spare Americans the financial burden of paying directly for care.

To cover those costs, Ms. Warren would impose a new tax on financial transactions, like buying and selling
stocks and bonds. She would also tax profits from investments that increase in value on an annual basis -- like
shares in Google or Apple -- not just when the assets are sold. She would raise taxes on American companies
that book profits overseas.

Ms. Warren would also increase her wealth tax on billionaires to 6 percent of the value of all their assets above
$1 billion, up from her previous proposal of 3 percent. And she would assess a tax on corporations that roughly
equates to what they currently pay for employees' health care, with a slight savings.

Ms. Warren says none of those tax increases would hit the middle class. Republicans mocked that claim.
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''Hahaha,'' Senator Ben Sasse of Nebraska said in a statement. ''This make-believe math is bonkers.''

Many analysts, including some Democratic economists, say it is unclear if Ms. Warren's combination of new
taxes -- including some never tried at this scale in the United States -- can raise anywhere close to the revenue
she estimates.

Perhaps the biggest unknown is how the capitalist American economy would function with levels of taxation
and spending more comparable to the social democracies of Scandinavia.

''It's as much an art as a science, trying to figure out the economic effects of policies we haven't seen before,''
said Diane Lim, a former economist for congressional Democrats and senior economist at the White House
Council of Economic Advisers, who now works for the Penn Wharton Budget Model. ''I'm worried it's
unrealistic. It's just unknown.''

Polls suggest a wide range of Americans support raising taxes on the rich, and in particular a tax on the very
wealthy. They also show increased numbers of Americans saying the government should do more to help them.
Those trends, in addition to the concentration of wealth at the very top, are helping to drive Democrats toward
more efforts to tax the rich and redistribute through the government, said Gene Sperling, a National Economic
Council director under Mr. Obama.

''The expansion of economic concentration and wealth inequality has put a greater focus on the top one-tenth of
1 percent,'' Mr. Sperling said, ''both because of the obscene economic inequality it signifies and as a practical
matter, there is just more revenue to capture there than 30 years ago.''

Mr. Sanders has said explicitly that he hopes the days of the American billionaire are numbered.

''What we are trying to do is demand and implement a policy which significantly reduces income and wealth
inequality in America by telling the wealthiest families in this country they cannot have so much wealth,'' he
said in an interview in September.

For all its detail, Ms. Warren's funding proposal leaves a lot of questions unanswered. Many of them relate to
how the new batch of taxes she proposed Friday would interact with the nearly $10 trillion in tax increases she
has already proposed for corporations, high earners and the wealthy.

Ms. Kaeding of the National Taxpayers Union Foundation said she worried that with Ms. Warren's latest batch
of tax increases, some investments could end up with an effective tax rate of more than 100 percent -- meaning
that investors would have to pay the government their entire gains on investment, and then some. She noted that
the combined corporate tax increases would give the United States the highest effective corporate tax rate in the
world among wealthy nations. Both would hurt growth, she said.

Liberal economists sometimes share those concerns, to a lesser degree. Mark Zandi, the chief economist at
Moody's Analytics, who also helped develop Ms. Warren's list of tax increases to fund Medicare for all, said that
raising taxes on businesses and the rich would hinder growth, but not as much as raising taxes on the poor and
middle class would. He also said economists would need to model the effects of increased government spending
on health care and potential cost savings to consumers.

''There will be, all else being equal, negative effects for sure'' from the tax increases, Mr. Zandi said. ''But there's
also the benefit of where that money is going. Where that shakes out, we will have to see.''

CAPTION(S):

PHOTO: Senator Elizabeth Warren, last month in Iowa, is staking her $20.5 trillion ''Medicare for all'' plan on
taxes that target the wealthy. (PHOTOGRAPH BY DEMETRIUS FREEMAN FOR THE NEW YORK TIMES)
(A17)

Copyright: COPYRIGHT 2019 The New York Times Company

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9/21/2020 Gale Academic OneFile - Document - Trillion-Dollar Pledges Cement Democrats' Bet on Taxing Rich

http://www.nytimes.com
Source Citation (MLA 8th Edition)
Tankersley, Jim. "Trillion-Dollar Pledges Cement Democrats' Bet on Taxing Rich." New York Times, 3 Nov.
2019, p. A1(L). Gale Academic OneFile, https://link-gale-
com.libaccess.hccs.edu/apps/doc/A604582162/AONE?u=txshracd2512&sid=AONE&xid=98192232.
Accessed 19 Sept. 2020.

Gale Document Number: GALE|A604582162

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