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Will taxes be a stumbling block or an opportunity in the Democratic debate?


Will Democrats move past Reagan-era orthodoxies this Sunday?

After ceding the spotlight to the Republicans all summer and fall, the Democratic primary is finally heating up. And amazingly, the increasingly close contest has not provoked new scrutiny of necklines, haircuts, high heels, mom jeans, or bowling scores. We are not hearing rancorous fights about email servers and voter files led by people one suspects are still trying to program their VCRs. Instead, we have been blessed with a meaningful discussion of public policy.

In the lead-up the Sunday’s debate, Hilary Clinton has attacked Bernie Sanders’s single-payer “Medicare for All” plan as a “massive across-the-board tax hike on working families.” The fight is a crucial one, not only for Iowa, but for the long-term agenda of the Democratic Party. The Democrats have been in a defensive posture on taxes since the Reagan era. They see broad-based tax increases as political kryptonite, but the kinds of popular New Deal-style programs Senator Sanders is espousing are very difficult to fund without them. The Clinton/Sanders fight is once again bringing this dilemma to the forefront.

Since at least the 1990s, Democrats have been loath to advocate any new taxes on those earning less than $250,000 a year. That is, of course, an extremely generous definition of the middle class. Only 5% of American households make that much money. Calling $250,000 a year the middle class is like saying the average American man is 6’ 2”. Maybe he’d like to think so, but frankly, that’s aspirational.

Nonetheless, Hilary Clinton has taken a firm line against raising taxes on those making less than $250,000 a year, and this week released a new plan to put a 4% surcharge on incomes over $5 million. Even the socialist Sanders has shied away from broad taxes increases, saying he would support a middle-class payroll tax increase only to fund paid family leave. Most of his policies are paid for with highly progressive taxes on offshore corporate income, Wall Street, and wealthy estates.

The problem is that tax proposals aimed only at the top usually don’t raise as much money as broad-based taxes. Some progressive tax hikes would raise substantial money—for instance, raising the cap on Social Security contributions. But that’s the exception, not the rule. Clinton’s 4% surcharge would raise about $150 billion over ten years, which is not quite enough money to fund NASA. $15 billion covers a little over a week of Defense Department spending, or ten weeks of SNAP Food Stamps.

If you want a new New Deal, you probably need New Deal taxes—that is to say, you need to tax middle class people. There’s a reason that Social Security and Medicare are funded by payroll taxes, which hit all working people, rather than special taxes on the very rich. In fact, countries with more developed welfare states, like Sweden, pay for that generosity with regressive tax systems.

Unwillingness to talk about taxes on the middle class is a stumbling block for any honest discussion about the future of the social safety net. Given that Americans are proud to be taxpayers, are happy to pay for Social Security and Medicare, and have been voting for state tax increases at record rates, it may be time for elected officials to catch up with the voting public. On Sunday, we will find out whether Democratic leaders can overcome their crippling tax phobia.

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