Why Democrats opposing Biden’s tax plan have it wrong

As Congress continues to debate President Biden’s $3.5 trillion budget bill, infighting among Democrats is standing in the way of passing key provisions in the agenda that would ensure wealthy individuals and corporations pay their fair share in taxes. Instead of seizing this opportunity to right the wrongs within the U.S. tax code that favors the rich, Democrats like Ways and Means Chairman Richard Neal (Mass.), Sens. Joe Manchin (W.Va.), and Senator Kyrsten Sinema (Ariz.) are blocking meaningful tax reform.

With the overwhelming majority of Americans agreeing that higher taxes on the wealthy are necessary, there’s nothing noble about what these politicians are doing. It’s time for rich Americans like myself to put our money where our mouth is and send a clear message to the Democrats opposing tax increases: we know who you are; we know where your districts are;  you are either part of the solution, or part of the problem.

The arguments currently being made by Democrats opposing Biden’s tax hikes echo the same outdated economic and political sentiments that the Trump administration used to justify tax cuts for the rich in 2017. Despite a slew of promises from Republicans shilling for Trump’s tax cuts, the U.S. economy only grew 2.9 percent in 2018. A study from the Economic Policy Institute found that companies paying minimal corporate taxes were actually more likely to cut their workforce and found no link between lowering tax rates and broader economic growth. 

As the U.S. works to recover from the economic devastation of the ongoing COVID-19 pandemic, Democrats opposing Biden’s tax plan are blocking a once-in-a-generation opportunity to fund our country’s recovery without making working Americans shoulder additional financial burdens. The eviction moratorium has ended, leaving over 750,000 financially insecure Americans facing homelessness. With federal unemployment benefits also ending, millions of families are on the brink of plunging into poverty. Increasing taxes on the wealthiest people in our society —  people who accumulated more wealth during the pandemic — is the best way Democrats can ensure our country has adequate funds to provide the resources and services necessary to support the most vulnerable and get our economy back on track. 

The tax plan rolled out by Rep. Neal and the House Ways and Means Committee last week doesn’t do nearly enough to address our rigged tax code and the loopholes that allow wealthy individuals and corporations to get out of paying their fair share. Most egregiously, the proposal will leave the vast, virtually untaxed fortunes of billionaires like Jeff Bezos untouched. Instead of bending to the will of Republicans and Democrats like Neal, Democrats in the Senate Finance Committee, led by Sen. Ron Wyden (Ore.), need to make key changes to the bill. 

First, those of us with investment income over $1 million should pay the same tax rates as people who work for a living. There is no intellectual or economic justification for working people in America to pay a higher tax rate than investors. Second, Congress needs to eliminate the “stepped-up basis” that allows the heirs of billionaires to avoid capital gains taxes on inherited assets. Last but not least, there needs to be an end to the Carried Interest Loophole which allows fund managers to mischaracterize their “ordinary” income as capital gain income for tax purposes. The Ways and Means Committee proposal extends the hold time for investments to five years, but given that most private equity firms hold investments for six years, this change will have essentially zero effect. The loophole should be eliminated entirely to avoid any possibility of exploitation. 

Wealthy people do not need any more lawmakers advocating on behalf of our financial interest — trust us, we’re doing fine. That’s why we’re urging like-minded wealthy individuals throughout the country to speak up. My organization, the Patriotic Millionaires, is waging an intense campaign in opposition to Democrats’ attempt to block President Biden’s agenda and limit the scope of the reconciliation bill’s tax hikes on wealthy individuals and corporations. We’ve let Democratic congressional leaders know that we won’t support Democrats who don’t support the tax reforms outlined above. We’ve also encouraged the Congressional Progressive Caucus to withhold their votes on the bipartisan infrastructure bill unless Democrats unite behind Biden’s tax plan.

Wealthy folks like us don’t need another handout, but millions of families throughout our nation do need a fully funded, fully functioning government. It’s time for Democrats to choose a side. Those who prioritize the wealth of the rich over the needs of most Americans don’t deserve the office they occupy. 

Morris Pearl is chair of the Patriotic Millionaires and former managing director at BlackRock.