There aren’t enough ‘rich’ folks to fund Biden’s priorities

President Joe Biden is trying to address climate change — and child poverty, infrastructure, racial inequities and many other big, thorny problems — with one hand tied behind his back. Yet, he’s the one who tied it, with a pledge to bankroll every solution solely by soaking the rich. On Wednesday, Biden announced the first tranche of his ambitious, several-trillion-dollar plan to “build back better,” focusing on critical infrastructure investments. This and other parts of his agenda have inspired discussion of a new American “paradigm” or “consensus” about the role of big government. Some have compared Biden’s efforts to Franklin D. Roosevelt’s New Deal, Lyndon B. Johnson’s Great Society or other ambitious pre-Reagan era endeavors, when government was seen as a solution rather than problem.

If American attitudes toward “big government” are shifting, though, the shift seems to be happening on only one side of the fiscal ledger. Americans may increasingly appreciate the shared benefits of a robust welfare state — but they don’t see funding those programs as a shared responsibility. At least, that’s what Biden is betting. Like many Democrats before him, Biden has promised to pay for government expansions by raising taxes only on corporations and the “rich,” everyone else spared. Exactly who counts as “rich” is an ever-shrinking sliver of the population. Barack Obama defined it as households making $250,000 or more a year; now, Biden says it’s anyone making $400,000 or more. There has been some inflation since the Obama years, but not enough to explain that much of a difference.

So, while nearly every American would benefit from Biden’s ambitious investments, more than 95% are excluded from helping to foot the bill, according to Tax Policy Center fellow Leonard Burman.

Of course, Biden’s emphasis on corporations and the rich makes sense. Tax increases are popular as long as “rich” means “someone making more than me.” High-income individuals and big companies have also done very well in recent decades relative to the rest of the country — yet enjoyed extremely generous tax breaks. They should pay more.

But even if these taxpayers pony up, there aren’t enough ultrarich people and megacorporations out there to fund the massive new economic investments and social services Democrats say they want and claim they plan to actually pay for.

This money tree has only so much cash on it, especially because Democrats are simultaneously pushing other tax breaks that benefit the rich.

With his no-new-taxes pledge, Biden has effectively ruled out tax-code simplification, since eliminating deductions or other loopholes inevitably leaves some paying higher taxes. And he’s precluded other valuable policy changes — chiefly, a carbon tax.

Many economists, including Treasury Secretary Janet Yellen, strongly agree that putting a price on carbon would be the most cost-effective tool for curbing climate change. Business groups and some Republicans have backed carbon taxes, too. But White House officials said it’s off the table; they and some other Democrats have also ruled out additional gas taxes, which once enjoyed bipartisan support.

Democrats sometimes point to Sweden or Denmark as examples of generous, successful welfare states. But, in those countries, taxes are higher and broader-based. Here, the middle class pays much lower taxes and even received a tax cut in the GOP’s 2017 tax overhaul. In the popular imagination, though, middle- and even upper-middleclass Americans are overly tax-burdened.

Here’s the argument I wish Biden would make: These new spending projects are worth doing. Rich people should pay their fair share of the bill. But we should all be financially invested in their success, at least a little. Taxation is the price we pay for a civilized society, as Supreme Court Justice Oliver Wendell Holmes Jr. put it. Politicians have made that argument before. During World War II, the government enlisted Irving Berlin and Donald Duck to produce pro-tax propaganda, “Taxes, to bury the Axis!” It seems to have worked: A massive broadening of the tax base, reaching lots of people who’d never paid income taxes before, had wide support.

“There’s a long American tradition of it being popular to tax rich people,” said Vanessa Williamson, author of “Read My Lips: Why Americans Are Proud to Pay Taxes.” “But there’s this other tradition we have, where government decided to do a big thing, and people thought it was a good thing to do, and so they agreed to help pay for it.”

Biden may have boxed himself into a corner with his no-new-taxes pledge. But he doesn’t have to stay there. Roosevelt provides an instructive example: He initially funded New Deal programs through soak-the-rich-style taxes. Then, when a national mobilization was needed for the war effort, “FDR had the political and moral capital” to ask the middle class to shoulder some of the financial burden, notes historian Joseph Thorndike. By then, the public trusted the rich weren’t shirking. If Biden wants to permanently transform the role of government, that may need to be his trajectory, too.