Dems Put Wealth Taxes on the Agenda

By Yuval Rosenberg and Michael Rainey

Uncle Sam Taxing article

Good evening! The blue wave continues to roll along, as the number of House seats won by Democrats has grown to 253, according to the Associated Press. Democrats have flipped 43 seats in the House so far, with 27 races yet to be called. On the Senate side, Democrats are still ahead in both Alaska and Mississippi as counting continues. A New York Times analysis today finds that Mary Peltola is likely to maintain her lead as the Alaska race heads to ranked-choice tabulation, while Scott Colom told reporters that he's confident he will hold on to his lead.

Here's what else we're watching.

Democrats Eye New Wealth Taxes, Even as California Ballot Initiative Falters

Although a controversial proposed tax on billionaires appears headed for defeat in California, the idea of taxing great concentrations of personal wealth remains alive and well among Democrats following their resounding victory in nationwide voting this week.

California's Proposition 40 would impose a 5% tax on the wealth of billionaires who resided in the state at the beginning of 2026, with the revenues to be used for healthcare programs, food assistance and education. The results are not yet final, but with 60% of the ballots counted, the measure has received only 45% approval and is not expected to pass, according to the Associated Press.

The proposed wealth tax was bitterly opposed by a handful of wealthy Californians, led by Google co-founder Sergey Brin, who contributed $100 million to Building a Better California, a $300 million effort that aimed to defeat the legislation.

Garry Tan, an influential figure in tech who runs the startup accelerator Y Combinator, celebrated the expected demise of the tax proposal. "We dodged a bullet on this asset seizure tax," he wrote on X on Wednesday. "Builders of tech in California had a good day yesterday: we want abundance and asset seizure is the one guaranteed way to kill the golden goose. Huge thanks to Sergey Brin here."

Dems press on: While the expected defeat of Proposition 40 in California is a setback for proponents of a wealth tax, newly elected Democrats in Congress are still expressing interest in the idea. As Politico's Brian Faler put it Thursday, "Rich people are back on the menu in Washington."

As part of their affordability agenda, progressives have floated various tax proposals aimed at the rich. Rep. Ro Khanna and Sen. Bernie Sanders have released a proposal called the "Make Billionaires Pay Their Fair Share Act," which would impose a 5% tax on those with net worth over $1 billion. Unlike the proposal for a one-time tax in California, the federal tax would apply each year.

Sen. Chris Van Hollen released a proposal last year aimed at the high incomes of the very wealthy. It would impose a graduated surtax on incomes over $1 million, starting at 5% and rising to 12% for those who earn more than $5 million a year. The top income rate would rise sharply to 49%, up from the current 37%. And the top tax rate for capital gains would rise from 23.8% to 35.8%. At the same time, lower-income households would receive tax cuts through new exemptions.

Van Hollen told Politico that despite the apparent defeat of the wealth tax in California, there seems to be "growing support" for such a measure. "People are recognizing that we have a tax system that allows individuals to accumulate huge amounts of wealth," he said.

Still, while Democrats may be moving toward higher taxes on wealth, they face a serious uphill battle against a White House controlled by a tax-cut-loving Republican, as well as a Senate in which they lack the ability to defeat a filibuster - not to mention more tax-averse moderates in their own party.

"It is clear Democrats will try to lower taxes for middle-income households and raise taxes on certain businesses and high-income households," Howard Gleckman, nonresident fellow at the Tax Policy Center, told CNBC. "But it is much too soon to know how."

Tax policy experts say that significant changes may have to wait until Trump leaves office.

"Democrats will have limited maneuvering room in 2027 given Republican control of the White House, but proposals made in 2027 will shape the direction of policy in the future," the Tax Foundation's Andrew Lautz and Garrett Watson wrote in a report published Wednesday. "Democrats in Congress will place a high priority on proposals to raise tax revenue from corporations and very high earners. While their ambitions to raise taxes will be limited by President Trump's veto, these proposals will serve as messaging and discussion vehicles over the next two years on the direction of the tax code."

Quotes of the Day

"I don't expect any change in economic policy. The Iran war, the tariffs and trade policy, the heavy-handed immigration policy, all are done under executive order. They're not legislatively driven. The president thought they were good policies before the election. I don't know why he'd change his mind after the election. So I think they will continue to be policies that restrain growth and add to inflationary pressures and interest rates."

− Mark Zandi, chief economist at Moody's Analytics, quoted on CNBC Thursday.

"Democrats will put forward an expansive healthcare agenda, including reversal of cuts to Medicaid and the ACA, but achieving all of that will be impossible with President Trump still in the White House."

− Larry Levitt, executive vice president at KFF, a healthcare research nonprofit, quoted in a KFF Health News piece examining how Democrats' election landslide could affect federal health policy.

As Levitt said, Democrats are expected to try to reverse Republican cuts to Medicaid and restore expired Affordable Care Act subsidies. They're also likely to push for lower insurance premiums and drug prices, where they might be able to find common ground with Trump. While some in the party have already pledged to pursue "Medicare for All," more piecemeal reforms are seen as being far more likely to succeed in the near term.

"One question ahead for Democrats is whether there are incremental steps on health care affordability that could appeal to both Medicare for All advocates and more moderate voices," Levitt wrote on social media. He also noted: "There are a variety of populist health care ideas that could, at least in theory, get bipartisan support, including: antitrust, lowering drug prices, curbing prior authorization, and more price transparency."

Some Democrats are looking to fix the No Surprises Act, the law that took effect at the beginning of 2022 to protect patients from unexpected charges related to out-of-network care. That law set up an arbitration system to settle payment disputes between providers and insurers, but the system has turned out to be far more expensive than projected. The Trump administration is now denying recertification for two arbitration firms that have been deciding payment disputes after determining that both "failed to meet minimum performance standards."

Number of the Day: $2.5 Trillion

One day after a powerful post-election rally, stock indexes tumbled on Thursday as investors shifted away from tech names on expectations that the buildout of AI data centers would slow. The Nasdaq dropped 5.52%, falling into correction territory, down more than 10% from a high reached last month. The sharp selloff in tech stocks wiped out $2.5 trillion in market value, The Wall Street Journal reports - "the biggest drop in the benchmark's history." The stocks of seven tech giants - Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia and Tesla - lost some $1 trillion in value. After weeks of mounting concerns among investors about the AI trade, The Journal says, "the power shift in Washington, as well as the election of several governors who have promised data-center restrictions, exposed the stock market's fragility."

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