Dems face big questions on tax plans for 2020

Democrats will make President Trump’s 2017 tax law a major campaign issue next year, but there is little consensus within the party about what their alternative should look like or if they should even offer one.

There’s strong evidence that Democrats won the messaging war over Trump’s tax law in the run-up to last year’s midterm elections, when they argued its provisions disproportionately benefited the wealthy.

{mosads}Exit polling conducted by news outlets after the midterms found that only 28 percent of voters thought the tax law helped them, while 45 percent reported no impact and 23 percent said it hurt them.

But with Democratic senators and representatives putting forth proposals that would dramatically increase taxes on the wealthy, Republicans are now going on the offensive, hoping to paint the Democratic Party as socialist ahead of the 2020 elections.

Democrats could try to defend themselves by unifying behind broad principles for tax policy, as they did in 2012, but that would require reaching a consensus on some difficult questions that remain unanswered within the increasingly diverse party.

Another option is to let White House-seeking Democrats set the agenda. But many of them are running to the left in hopes of winning the party’s nomination, and that could be problematic for Senate Democrats such as Jeanne Shaheen (N.H.) and Doug Jones (Ala.) who are seeking reelection next year in swing or conservative-leaning states.

A big question is where to draw the line on increasing taxes. Before the 2012 election, Democrats favored raising taxes on income as low as $250,000. Since then, Senate Minority Leader Charles Schumer (N.Y.) has preferred the $1 million mark, to protect residents in more expensive states such as New York and California.

Democrats also will have to answer tough questions about whether to dramatically ratchet up taxes on the country’s wealthiest residents — a position favored by freshman Rep. Alexandria Ocasio-Cortez (D-N.Y.) — or target Wall Street by proposing a tax on financial transactions or closing the “carried interest” tax loophole.

{mossecondads}“It’s something that has to be discussed,” said Sen. Bernie Sanders (I-Vt.), who is running for president as a Democrat. “At the end of the day, when you have major corporations that make billions in profit — and in the case of Amazon, owned by the wealthiest guy in the world not paying a nickel in taxes — nobody thinks that makes sense.”

“I think the sentiment is out there that there must be, at a time of massive income and wealth inequality, a progressive tax system which demands the wealthy and large corporations start paying their fair share. What that will be, we will see,” added Sanders, the ranking member on the Senate Budget Committee.

Senate Democrats sketched out part of their vision for taxes last year when they unveiled a $1 trillion infrastructure plan.

The proposal called for rolling back key parts of Trump’s 2017 tax law by raising the top-bracket tax rate on individual income back to 39.6 percent, reinstating the alternative minimum tax, restoring the estate tax and increasing the corporate tax rate to 25 percent.

But the blueprint fell short of the more aggressive proposals some Democrats are now pushing to target the wealth controlled by the country’s richest individuals and families.

Sanders, for example, has called for an annual wealth tax of 1 percent on all net worth exceeding $21 million as well as lowering the threshold for the estate tax from its current level of $11 million to $3.5 million.

Sen. Elizabeth Warren (D-Mass.), another White House hopeful, is pushing a 2 percent annual tax on assets totaling more than $50 million and a 1 percent surtax on net worth exceeding $1 billion.

New York Times columnist Andrew Ross Sorkin last month proposed fixing the carried-interest tax loophole as an alternative to Ocasio-Cortez’s proposal to impose a 70-percent tax rate on income over $10 million.

Sen. Brian Schatz (D-Hawaii) recently introduced a bill that would tax the sale of stocks, bonds and derivatives at 0.1 percent, an idea that would hit high-frequency traders who have begun to dominate the markets.

Taxing financial transactions or closing the carried interest tax loophole, which allows hedge fund and private equity managers to pay lower rates on shared profits than many middle-class people pay on regular income, would raise costs for an important constituency for Schumer in New York: the financial industry.

Schumer reiterated his support for closing the carried interest loophole after the 2016 election during an interview on NBC’s “Meet the Press.”

Last month, he co-wrote a New York Times op-ed with Sanders proposing legislation to prohibit corporations from buying back their own stock unless they pay workers at least $15 an hour and provide seven days of sick leave.

Another looming question is whether a component of a Democratic tax plan should attempt to reduce the federal deficit, which is projected to exceed $1 trillion in 2019.

Sen. Kamala Harris (D-Calif.), another presidential contender, has unveiled a plan that would add $2.8 trillion to the deficit over 10 years and $3.4 trillion in the second decade. Its centerpiece is a provision that would provide up to $3,000 in tax credits to middle- and working-class families. It also would provide tax credits to middle-income Americans who spend a high percentage of their earnings on rent.

But others such as Sen. Ben Cardin (D-Md.), a member of the tax-writing Senate Finance Committee, say Democrats need to endorse a plan that also reduces the deficit.

“There have to be some ground rules, including revenues. What is going to be the end number on revenue?” he asked. “My fear is that will be a minor consideration, but I believe the tax code should raise revenue. We need to pay our bills. I don’t like debt.”

“I hope that’s part of the debate,” he added. “I might be lonely in that regard.”

One key difference between now and 2012, the most recent presidential reelection year, is that Democrats back then controlled the White House and Senate, whereas now they control only the House.

Even so, there is another good reason for coming up with a caucuswide position on tax policy: It would give Democrats a basis for negotiation with Republicans who want to revise Trump’s 2017 tax law.

“There’s been some very, very initial conversations,” Cardin said regarding discussions among Democrats about where they should stand on major tax policy issues.

He said the desire of Republicans to fix problems with Trump’s signature tax law provides a significant opportunity to craft tax legislation in the 116th Congress.

“We know that this 2017 bill is going to need 2.0 or technical corrections. We want to make sure that we debate that on a broad basis, that it’s not just a narrow fix of the problems,” Cardin said.

Other Democratic hopefuls are expected to announce their tax plans in the coming months.

“We are definitely going to be coming out with a lot on taxes,” said Sen. Cory Booker (D-N.J.). “Right now, I’m not going to say anything until I have my own plan to speak about.”