Kamala Harris Is Dealing Away A Huge Democratic Advantage on Taxes
Voters, especially working class voters, want the rich to pay more, and the Democrats will be in a great position next year to make that happen ... even, possibly, if Harris loses.
Democrats have a habit of snatching defeat from the jaws of victory, and I fear that they’re doing it again. I’m not talking about the presidential contest between Kamala Harris and Donald Trump. That’s going well, with momentum clearly shifting in Harris’s direction. I’m talking about negotiations over next year’s tax bill between Democrats and Republicans. These negotiations will occur even if Harris loses, provided the Democrats hang onto either the House or (less likely) the Senate. Unless Republicans win the White House and the Senate and the House, the Democrats will be in their strongest position since 2012 to raise taxes on the rich. That’s because the Trump tax cuts are due to expire at the end of 2025, just as the Bush tax cuts expired at the end of 2012. A President Kamala Harris or a House Speaker Hakeen Jeffries will be able to say: We won’t support any tax change we judge inferior to the status quo prior to the 2017 Trump tax cut. That’s a very strong bargaining position.
But Harris on Wednesday backed off a little on raising the capital gains tax, proposing to hike it to 28 percent on households earning more than $1 million rather than the 39.5 percent that the Biden administration proposed in this year’s budget. There’s no earthly reason why capital gains should be taxed differently from labor income (even for households earning less than $1 million), and the top marginal income-tax rate that Biden and Harris favor is 39.5 percent.
History may be repeating itself. In 2012 President Barack Obama let congressional Republicans keep 82 percent of the godawful Bush tax cuts. This was the same negotiation that bequeathed Democrats their current taboo against raising taxes on anybody who earns less than $400,000. Elizabeth Warren calls this the “tax doom loop,”wherein a plutocracy strengthened by the last tax cut opposes the next one more effectively. In 2012 Obama blew it, but at least in that instance you could say there were extenuating circumstances: a fragile economic recovery from the Great Recession, which had ended only three years earlier, and a threatened automatic “sequestration” under a deficit-cutting deal Obama agreed to the year before to get the Republicans to raise the debt limit. The only extenuating circumstance Harris faces this time is that her billionaire donors don’t like Biden’s plans to tax the rich. “Kamala Harris is listening to business people and getting their feedback on what’s fair and what will lead to more investment in business,” the billionaire investor Mark Cuban crowed on X. “It’s only going to get better.” I sure hope Cuban is wrong.
A countervailing pressure to which Harris ought to pay more attention is that she continues to do very badly with working class voters, who want the rich to pay a whole lot more in taxes. Trimming Biden’s ambitious tax plan is not a way to win them over, and she isn’t. The latest CNN poll shows that although, yes, Harris has acquired a narrow lead in battleground states, she still isn’t winning working class voters there, who continue to favor Trump by six or seven percentage points. As I have noted perhaps a thousand times by now, it’s foolhardy for any Democrat to expect to win the White House without a working-class majority, because that’s only ever happened once during the past 100 years, when Biden did it in 2020. Could it happen again in 2024? Possibly, but Harris’s working-class deficit is four or five percentage points worse than Biden’s in 2020. Nearly two-thirds of the electorate is working class. You won’t win them over by caving to Mark Cuban.
That’s the subject of my latest New Republic piece. You can read it here.
I think you are confusing capital gains tax rates with corporate tax rate. The 2017 tax law cut the corporate rate from 35% to 21%. The long term capital gains rate remained at 20%, where it had been set by the 1997 tax law, which cut it from 28%. Short-term gains (those held less than a year) are taxed as ordinary income. The 2003 tax law cut the long term capital gains rate from 20% to 15%, which went back to 20% under Obama, where it is today. More serious is that the 2003 law made dividends subject to capital gains rate, instead of being taxed as ordinary income as it had always been before.
A program of tax increases and other policy that should be sellable during a financial crisis would be:
1. Repeal the 1997 and 2017 tax laws returning LT cap gains rate to 28% and corp rate to 35%, the levels Reagan set them at in 1986.
2. Return to taxing dividends as ordinary income, as it had been under Reagan.
3. Repeal SEC rule 10-18b permitting stock buybacks
4. A ban on Fed QE and government assistance to trouble financial firms or investors. Let them go bankrupt. We can deal with the short-term decline in employment due to panic caused by mass bankruptcy of financial firms as we did to mass unemployment during the pandemic. Once business not involved in speculation (which is most of them) see that their customers haven't gone away and business is still good, the fear of depression with fade and there won't be a depression.
Injection of cash will stop a collapse dead in its tracks. Last time the injection of cash (ca $5T) was into financial markets. I propose we inject zero into financial markets (no QE) and spend the $5T to inject cash into the goods and services economy, as we did during the pandemic. However, let's NOT inject another $4T into financial markets as we also did during the pandemic (and you saw the effect of this on the stock market--it soared),
https://mikealexander.substack.com/p/why-neoliberalism-should-be-replaced/comments
The problem with the capital gains issue is most people don't have capital gains , the average joe living paycheck to paycheck is not worried about the tax rate on his stock ,,sale ,, gains .and if your are really worried about that problem just buy one of those fancy beach condos and claim it as an annual non rental property and take it as a loss against your gains ,,,( sure it sits empty ? ) if you have problems working the numbers just ask any 3rd grader ,, he or she can work the numbers for you . And don't worry about an IRS audit,, their budget has been cut to zero and besides you are small fish and they are looking for bigger fish to fry .
Have a great day my friends.