The Memo: Biden’s bet on taxes

President Biden and the Democrats are making a big bet that the politics of taxation have changed.

In their view, the American public — frustrated by the economic impact of COVID-19 and years of stagnation for the middle class — is willing to countenance higher taxes, at least on corporations and the wealthy.

“What people care about is, are jobs being created, am I doing better? The notion that there is a link between higher taxes and you not doing better is simply not the lived experience of the majority of people in the United States,” said Simon Rosenberg of the centrist New Democrat Network, contending that there is simply no data to support the idea that higher taxes per se slow economic growth.

The president and his party are also betting that any proposed shift in taxation will not enfeeble the post-pandemic recovery.

“Raising taxes … will not slow the economy at all,” Biden said in response to a question from Kelly O’Donnell of NBC News at a White House news conference Friday. “Asking corporate America to pay their fair share will not slow the economy at all.”

If he’s wrong, the results could be politically disastrous.

Biden has declared that an increased corporate tax rate would be the primary means of paying for his massive infrastructure proposal. His plan would lift the corporate tax rate from 21 percent to 28 percent. It had been 35 percent before the tax cuts enacted by former President Trump in 2017.

Separately, some Democrats in the Senate are toying with changing how capital gains tax is levied upon a person’s death, in another bid to boost revenues.

The big picture for the president and his party is stark. Expansive government action is required to repair and reinvigorate an ailing America, they say.

Does the public see it the same way?

Polling on Biden’s infrastructure plan is sparse so far. His $1.9 trillion COVID-19 relief bill is popular but it involved no major tax increases.

The economy has traditionally been among the weaker issues for Democrats. During last year’s election campaign, Trump was often seen as better than Biden on the topic.

An Economist-YouGov poll conducted March 27-30 found Biden at acceptable but unspectacular polling levels on the economy. Forty-five percent of Americans approved of his handling of the issue, with 39 percent disapproving and 17 percent expressing no opinion.

Independent voters leaned against Biden, with 38 percent approving and 44 percent disapproving of his economic performance.

It’s rather shaky ground on which to base such a massive spending program.

But American politics has come a long way from then-President Bill Clinton proclaiming “the era of big government is over” in his 1996 State of the Union address.

Now, progressives such as Rep. Alexandria Ocasio-Cortez (D-N.Y.) say that Biden’s infrastructure proposal, already billed at $2 trillion over eight years, should be far bigger.

Clinton’s centrism was a reaction against stances that had hurt Democrats in the years before his rise.

Back in 1984, Democratic presidential nominee Walter Mondale had admitted during his nomination acceptance speech that he would raise taxes if elected. Mondale claimed that he was being honest about this and that his opponent, then-President Reagan, was not. His remark came to be seen as a huge misstep. Reagan trounced Mondale that fall.

Rosenberg said that examples such as the Mondale acceptance speech were now “prehistoric” for most Americans.

Polling on general questions of taxation is intermittent and ambivalent, however.

Back in 2019, separate polls from Quinnipiac University and NPR-PBS NewsHour-Marist found strong support for a new tax on the super-wealthy. The same year, a Gallup poll found that 69 percent of Americans thought corporations paid too little tax and 62 percent thought the same about “upper income people.”

Yet at the same time, when Quinnipiac asked whether respondents would support a 70 percent tax rate on people whose income was more than $10 million, 59 percent were opposed.

Results like that feed into the belief, widely held among conservatives and many centrists, that the American public reveres free enterprise, admires wealth and balks at tax increases.

Republicans believe that is still true — and can be used to bat down Biden’s infrastructure proposal.

Even comparatively moderate GOP figures like Sen. Rob Portman (R-Ohio) have criticized the tax-raising element of Biden’s proposal. Portman said he would not back the plan because of “steep new taxes on businesses which will hurt working families and last more than a decade.”

The U.S. Chamber of Commerce and the Business Roundtable are among those also opposing it.

“At a time when our economy is recovering from a once in a lifetime pandemic where over nine million Americans remain jobless, the Biden Administration is out of the gate proposing job killing taxes meant to enrich the government,” according to a statement from Katie Miller, a former aide to former Vice President Mike Pence who is now affiliated with a newly formed conservative group the Coalition to Protect American Workers.

Miller acknowledged the need to update the nation’s infrastructure but insisted Biden’s plan would “only stifle growth and cost hundreds of thousands of Americans their jobs.”

The debate is only beginning, but the stakes are huge.

The Memo is a reported column by Niall Stanage.