The Republican Party has just taken over both houses of Congress for at minimum the next two years – so this may seem an odd time for House Democrats to announce major policy proposals to raise the fees paid by the financial services industry and taxes on the wealthy, all in an effort to give a tax break to the middle class.
Yet there was Rep. Chris Van Hollen (D-MD) on Monday, in a speech at the left-leaning Center for American Progress, proposing a $1.2 trillion redistribution of wealth from the richest Americans to a large swath of middle- and lower-income earners over the next 10 years.
Van Hollen’s centerpiece proposal, the Paycheck Bonus Tax Credit, would cut taxes by $1,000 per year per worker, up to $2,000 for a couple earning a combined $200,000 or less. The proposal would also give an extra $250 credit to individuals who save at least half their $1,000 credit in an eligible investment vehicle.
In a release, Van Hollen said, “Our current tax code imposes higher tax rates on income earned through hard work, while providing preferential treatment to unearned financial gains and allowing billions of dollars of stock profits and other capital gains to pass tax-free to heirs of multi-million-dollar fortunes.”
“Taken together,” he continued, “the preferential tax treatment of certain kinds of non-work, unearned income has contributed to a startling result: 17 percent of the major tax expenditures in the tax code flow to households with the top 1 percent of incomes. That translates into roughly $150 billion in tax breaks for the very wealthy each year. We need to do more to even the playing field and ensure that the tax code increases the take-home income of working Americans and does not just reward wealth.”
Other elements of Van Hollen’s proposal include incentivizing companies to raise worker pay by placing restrictions on the tax treatment of executive salaries for companies that don’t also increase employees’ income, incentivizing worker training programs and more. He would pay for the program by slashing tax breaks that favor the very wealthy, and by imposing a fee on financial market transactions that, while negligible to the individual investor, would cost high-frequency traders billions.
The proposal comes just days after President Obama called for another major program to aid low- and middle-income workers: two years of free community college for all Americans. The rationale behind that program is that for job seekers today, two years of college is the equivalent of what a high school diploma was a generation ago. When a high school diploma was the ticket to a middle class job, the U.S. made high school free. Now that a little more education is required, the thinking goes, the government should provide that as well.
To be clear, neither of these proposals is likely to go anywhere legislatively in the next two years. What Obama, Van Hollen and the Democrats in general are doing is trying to define the party’s position in advance of the 2016 election. The Democrats want to retain the White House and recapture the Senate – and with those goals in mind, they want to choose the battlefield for the next election and seize the high ground from the outset.
In reality, a soak-the-rich tax plan probably wouldn’t even make it through a Democratic-controlled Congress. But now, with Republicans running the show on both sides of Capitol Hill, Democrats like Van Hollen are in a position similar to the one that allowed their Republican colleagues to offer and vote on countless doomed proposals to repeal, defund, or otherwise damage the Affordable Care Act. With no chance of passage, the proposals are meant not to become law – but to tell voters where the party stands.
Democrats, the evidence suggests, have decided that the economic populist route, as popularized by Massachusetts Sen. Elizabeth Warren, might be the one that takes them back to partial control of Congress in 2016.
That also raises a crucial question about the Democratic presidential field.
Warren, architect of the Consumer Financial Protection Bureau and a regular antagonist of Wall Street, has ironclad populist credentials. She is also seen by many as a top potential challenger to former Secretary of State Hillary Clinton, currently the prohibitive favorite to win the Democratic nomination.
The problem is that while Hillary Clinton, a former senator and First Lady, represents many things to many people, economic populism is not her sweet spot. Fairly or not, she will be associated with her husband’s policies during the two terms Bill Clinton served in the White House. Those years were marked by a thawing of the relationship between Democrats and Wall Street, highlighted by the Gramm-Leach-Bliley Act, which stripped many decades-old regulations from the financial services industry.
If Democrats are going to make 2016 about economic populism, they are either going to need a new frontrunner – or Hillary Clinton is going to need to find her inner Elizabeth Warren.
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