Democrats have pledged to tackle an affordability agenda if they capture control of Congress in the November midterms. But as they plan for 2027 and eye the presidential election in 2028, there's something of a split in the party when it comes to tax reforms - or at least plenty of debate about how to cut and/or raise taxes to fund their agendas.
Some lawmakers have proposed or embraced the idea of broad tax cuts for the working and middle classes along with sharply higher taxes on the wealthy. Most notably, Sens. Chris Van Hollen and Cory Booker each introduced tax-cut plans earlier this year.
The Van Hollen plan called for eliminating federal income taxes for Americans who make under $46,000 a year, or $92,000 for couples, with tax breaks for people earning up to $80,500 and a new alternative minimum tax for low- and middle-income filers. The plan also would impose a surtax on high-income filers. A Penn Wharton Budget Model analysis found that the overall effect of Van Hollen's changes would increase federal revenue by $264 billion a decade.
The Booker plan, meanwhile, centered on exempting the first $75,000 in income for joint filers by doubling the standard deduction. The Penn Wharton Budget Model estimated that Booker's plan would reduce federal revenues by up to $6.4 trillion over a decade, though a proposal to increase in the top tax rate would offset about $1.4 trillion of that.
Other Democrats considered to be contenders for the party's 2028 presidential nomination have also touted their tax-cutting bona fides as part of their current campaign efforts.
Such proposals have met with criticism from some policy wonks in the party, who have derided them as "slopulism," questioned the embrace of policies associated with Republicans and argued that the cuts would undermine federal programs that should be at the core of a Democratic agenda. "If you want to be the party of 'government can do things,' you have to make it so that the government can do things," Ben Ritz of the Progressive Policy Institute said in a podcast back in April.
In a recent Substack post, Ashley Schapitl, a longtime congressional communications and policy staffer who served as deputy assistant secretary for public affairs at the Treasury Department, takes aim at Booker's plan in particular and calls for funding tax enforcement to counter what she called a surprising progressive embrace of anti-tax talking points and a "full-blown bipartisan tax revolt."
"While Democrats have a lot of policy ideas, it's less clear how they're planning on raising the revenue necessary to pay for them," Schapitl writes. "To advance good politics, Democrats don't need to become a watered-down version of the anti-tax GOP. And to pass good policy, Democrats simply can't fund the robust social safety net Democrats say they support if the party is going to adopt the view that only high earners should pay federal income taxes. Nor should revenue from new taxes on the wealthy be directed to blunt, costly tax cuts, rather than toward expanding social programs and credits that benefit low-income Americans."
Schapitl argues that, while there are plenty of options for tax reform, Democrats should focus on restoring the IRS funding enacted under the Biden administration, especially given that the Congressional Budget Office has estimated that every $1 provided for IRS enforcement efforts can return $6 in revenue. And, Schapitl adds, Democrats "should pitch this as an effort to unrig the economy and make the rich pay their fair share. ... Not even the loudest anti-IRS member of Congress wants to defend a millionaire who didn't bother to file or a private-jet user who was claiming a bogus tax break."
Schapitl says that the tax revolt is rooted in voters' feelings that the system is unfair. "Democrats need to learn this lesson: voters aren't frustrated by the fact that they have to pay taxes; it's that they don't trust that other people are paying their fair share too," she writes.
As Democrats plan for possible tax reforms, a pair of prominent left-leaning economists earlier this month published a paper titled "$15 Trillion on the Table in 2029: Ordinary Taxes to Meet an Extraordinary Fiscal Moment." They write that the country's unsustainable fiscal trajectory needs to be addressed and that higher revenue will be required - and that the options for raising that revenue are more substantial than those for cutting spending. They detail five areas of "tried and true" tax policy that they estimate could generate nearly $15 trillion in added revenue from 2030 through 2039, including investment in the IRS; raising the corporate tax rate and strengthening the corporate and international tax systems; implementing a range of sin taxes; returning individual and pass-through rates to 1990s levels; and adjusting the tax treatment of capital income.
They estimate these reforms would altogether generate nearly $15 trillion over the 2030-2039 budget window and add that corporate taxes are the easiest tool to capture more revenue from capital income while funding the IRS would also be essential.
"We are not so naive that we think that a future Congress will legislate these revenue-raising options in full," the economists write. "Our hope is that by pointing out how much revenue sits in these buckets, we are giving policymakers viable options."