Column of the day: Democrats are reluctant to tax the rich
Polls consistently find broad support for taxing the rich – but what exactly does that mean? Washington Post columnist Catherine Rampell points out that Democrats’ definition of “rich” has shrunk over time to “a tiny – and endangered – group.”
President Obama has set the limit on tax increases at $ 250,000 in annual income. President Biden moved it to $ 400,000. And Rep. Alexandria Ocasio-Cortez (D-NY), who wore a much-discussed dress that read “Tax the Rich” as she attended the Met Gala this week, responded to criticism in part by saying: “They want you to think that when we talk about the rich, we are talking about a doctor or a lawyer instead of someone with hundreds of millions of dollars, even billions of dollars.”
Rampell notes that Democrats’ focus on the richest of the rich comes as the Democratic base has shifted to include more high-income voters and college graduates – but the tax changes proposed by the House Democrats this month are also leaving plenty of breaks in place for the ultra-rich.
The House plan, for example, stops long before raising capital gains tax to match the income tax rate, as President Joe Biden had requested, and it does not eliminate the “grossed-up basis” provision that allows assets that have appreciated in value to be passed on to heirs tax-free. “This is a huge boon for anyone with dynastic level wealth because it means their wealth can escape capital gains tax,” says Rampell. Democrats are also considering options to repeal or increase the $ 10,000 limit on State and Local Tax Deductions (SALT), another change that would benefit higher earners (see more on this below).
“Yes, Democrats are planning to raise the highest personal and corporate income tax rates,” Rampell writes. ” It’s not nothing. But that’s nowhere near enough to pay for the generous welfare state Democrats want to build. Paying for it would ultimately require levying higher taxes on the middle class as well, as do other countries with more extensive safety nets. “
Read the full column at the Washington Post.