Democrats are preparing to increase the budget deficit by forcing billionaires and corporate giants to pay higher taxes.
Some like Representative Keith Ellison, D-Minnesota, have already embraced the idea, even as they promise to cut back on military spending.
“We need to eliminate loopholes, eliminate deductions and more specifically, tax high-income people … who receive a lot of deductions,” Ellison said in March. “That kind of money makes their life much better, than somebody making a lower salary who has to work one less day a week to make ends meet.
In the example he gave, the person who has to work one fewer day a week would still be taxed at a rate higher than Ellison’s. The wealthy actually get many more breaks on their income taxes than high-income individuals. An estimated 15 percent of all U.S. taxpayers, or about 12 million people, file as billionaires.
Republican President Donald Trump’s first tax cut delivered cuts to the biggest corporations. Corporations get larger deductions on expenses like expenses for stock options. They also get more generous tax breaks for employing highly-paid workers. So small businesses probably aren’t affected by the proposed new tax rate for high-income people.
Democrats propose using the additional money to fund things like more teachers, infrastructure projects, or even free college tuition.
But fiscal experts warn against taxing people who have enough money to pay taxes in the first place, which is why Republicans only agreed to cut corporate taxes by $1.5 trillion over 10 years. The process of raising revenue could slow the national economy.
Jonathan Chait of New York magazine explained it this way: “Now, businesses will be less eager to invest in research and development, in new equipment, and in new jobs — just as American automakers in the 1930s were unwilling to expand their capacity during the Great Depression.”
Ellison predicted in April that the paychecks of taxpayers with incomes of $1 million or more would rise by 15 percent.
Ellison and many other Democrats aren’t sold on the idea of reversing decades of trickle-down tax cuts.
“I also believe that we need to make it more expensive for our rich people to live rather than cut capital gains taxes that help middle-class people,” Ellison said.
Ellison and his allies think people with higher incomes will have to pay more even if they can afford to.
“I think the people that need the tax breaks most are going to have to get them,” Ellison said.
However, the nation’s tax code is also more progressive than it was 30 years ago. The top one percent of income earners pays about 25 percent of the federal income tax. The top one-tenth of one percent pays an average of 30 percent. That is before the government also collects more from other taxes and regulation.
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