Congressional Republicans are channeling one of my favorite political hacks, the late Massachusetts Congressman Jimmy Burke, who boasted he voted for spending bills, tax cuts and against any increase in the debt ceiling.
House and Senate Republicans voted against the COVID-stimulus bill and oppose the Biden infrastructure and tax measures. Yet, despite the votes, more than a few cite their support for popular provisions in each spending initiative, rail against deficits, and oppose tax increases.
Republicans complain the $2 trillion Biden initiative is full of stuff that really isn’t infrastructure. Sen. Roy Blunt (R-Mo.) says all that should be taken out and reduce the size to $600 billion.
The biggest, $400 billion over eight years, is to provide more personnel and resources for in-home care for the elderly or people with disabilities. We have a son with disabilities, and we can afford expensive good care; we have encountered many families who cannot. If you know anyone with a loved one with Alzheimer’s, you’ll look more kindly on this provision. Does Sen. Blunt believe this isn’t an urgent need?
But what really gets the conservative juices going is opposing the proposed tax increases; since the fall of the Berlin Wall, tax cuts have been the only glue that holds increasingly disparate Republicans together.
This, they say, is exactly the wrong time to boost taxes. When “you’re trying to rebuild the economy from the biggest hit we’ve had in 90 years,” says Rep. Kevin Brady (R-Texas), “why would you impose a massive tax on the very American businesses [that] you want to rehire workers?”
Except when these proposed tax hikes would take effect, the economy is expected to be surging. When, we might ask Republicans, would they think conditions might be propitious for a tax increase?
Let’s not forget that in 2017, Rep. Brady — as chairman of the House Ways and Means Committee — shepherded through the huge Trump tax cut, which he said would create higher paying jobs and basically pay for itself. It did neither; instead, most of it went to stock buybacks.
An overarching point as the Biden proposal is considered: America is not overtaxed, far from it.
Overall U.S. taxes are less than a quarter of the gross domestic product — far less, according to the Organisation of Economic Co-operation and Development, than other major economies like Germany and Japan. The same with federal taxes which were 16.4 percent in 2019, about a percentage point under the average over the past 50 years and well under the 20 percent in 2000 when the economy was booming.
Another complaint is Biden’s spending proposals are over eight years, while the tax increases are over fifteen. “The basic structure of paying for eight years of infrastructure improvement with 15 years of tax increases is sound,” says Michael Graetz, a Columbia and Yale law school professor and former top tax official in the George H.W. Bush Treasury Department, “as long as the infrastructure investment is in things like roads, bridges, rail and air transportation and broadband, electric grid improvements, electric automobile charging stations, etc. This, of course, is the way we pay for home purchases and new cars over time since they will be useful for a number of years.”
These tax initiatives all are on the corporate side, starting with an increase in the top corporate rate to 28 percent from 21 percent. This has drawn the ire of business groups. Yet, the top corporate rate was 35 percent until Trump lowered it all the way to 21 percent four years ago.
Again, American businesses in general are not overtaxed. Corporate taxes comprise only 7 percent of federal revenue and 1 percent of GDP, lower than most competitors.
There also is toughening of rules that allow multinational companies to avoid taxes, and a minimum corporate tax. After 2017 dozens of major companies, including FedEx, Nike and Duke Energy paid no taxes. That’s an issue that these low-tax Republicans will avoid.
The context of higher taxes on multinationals is a serious effort for minimal global tax rate. This would help discourage the practice of multinationals seeking havens to avoid taxes. This, as Treasury Secretary Janet Yellen said last week, might “stop the race to the bottom.”
The battles will get fiercer with the next round of Biden proposals to raise individual taxes. Expect to hear Republicans and their allies charge that restoring the top rate for upper income taxpayers to 39.6 percent from 37 percent, treating the capital gains of millionaires like ordinary income, or leveling modest taxes only on the wealthiest estates is “socialism.” By that logic, Dwight Eisenhower was a socialist — the tax rates on the wealthiest during his administration were considerably higher.
Undoubtedly, the Biden infrastructure/tax proposals will be modified in Congress to win support from all Democrats. Sen. Joe Manchin (D-W.Va.) says the corporate rate shouldn’t be higher than 25 percent, though most of his West Virginia constituents might disagree. Northeast liberals insist any tax bill must restore full deductibility of state and local taxes, though that would be regressive.
The bottom line: These are much needed initiatives, and the tax increases to pay for much of them are reasonable.
Al Hunt is the former executive editor of Bloomberg News. He previously served as reporter, bureau chief and Washington editor for the Wall Street Journal. For almost a quarter century he wrote a column on politics for The Wall Street Journal, then The International New York Times and Bloomberg View. He hosts 2020 Politics War Room with James Carville. Follow him on Twitter @AlHuntDC.