Manchin’s plan to tax the rich to ease the deficit misses the point

After an entire year of stonewalling Congressional Democrats’ attempts to pass a reconciliation bill, Sen. Joe Manchin (D-W.Va.) again claims to be open to a deal. Democratic leadership is desperate to pass anything, and it looks increasingly likely that if a bill does end up passing, it will look more like a deficit-reduction package than a sweeping social reform bill like the original Build Back Better plan.

Manchin’s ideal bill appears to include significant tax increases on the wealthy, but he’s reached the right conclusion for the wrong reasons. We don’t need to tax the rich to cut the deficit, we need to tax the rich because doing so will slow the growing inequality that is destabilizing our nation. 

The explosion of billionaire wealth in America in recent years (U.S. billionaires got over $2 trillion richer during the pandemic alone) isn’t just unseemly — it’s dangerous. Economic inequality has real-world consequences. When wealthy people are able to undermine the natural competition that arises in a capitalist economy and monopolize access to the resources and opportunities others could utilize to succeed, they end up draining the economy of the growth that would have come from those who didn’t start out wealthy. 

Less equitable societies have significantly lower long-term economic growth rates. Here in the U.S., rising inequality from 1990 to 2010 shrunk our nation’s GDP by a whopping five percentage points. Whether or not the GOP and their moderate allies want to admit it, inequality will come around to hurt everyone, including the ultra-wealthy. 

Manchin has outlined changes that would have a significant impact on inequality, like raising the corporate tax rate to 25 percent, increasing the capital gains rate, and eliminating loopholes that allow the wealthy to skirt their tax responsibilities. These changes may not go far enough to effectively stop the out-of-control wealth inequality plaguing our country, but they are a good first step in the right direction. But do we have to wrap these necessary tax changes behind the charade of deficit-trolling?

Concern for the deficit is the catch-all excuse usually employed by the Republicans to water down any slightly progressive change that’s proposed or anything that might upset their donors. Now Manchin is reaching into the GOP playbook and pulling out this classic. 

This excuse only seems to rear its head every time a Democrat suggests spending to make the lives of Americans better or to save our planet from climate change. But when it comes to increasing the military budget to an egregious $770 billion dollars or passing the 2017 GOP tax cut, which drastically cut taxes on the wealthiest corporations and individuals while adding trillions to the debt, suddenly it’s nothing but silence from the deficit hawks. 

If Joe Manchin cares about the long-term economic future of this country, he should forget the deficit and solely focus on passing tax increases on the rich to curb growing income inequality. Now more than ever, we need to raise taxes on the wealthy and stop the growing wealth gap that is exponentially widening. We can’t afford to use outdated excuses as the reason to tax the wealthy.

Morris Pearl is the chair of the Patriotic Millionaires and a former managing director of BlackRock, one of the largest investment firms in the world.