Democrats aim to tackle enormous gains of top 1%

WASHINGTON » Senior House Democrats on Monday unveiled legislation that would represent the most significant tax hikes on the rich and certain corporations in decades, reflecting President Joe Biden’s pledge to confront a dramatic surge in U.S. inequality.

House Ways and Means Chairman Richard Neal, DMass., proposed more than $2 trillion in new revenue that would overwhelmingly hit the richest 1% of Americans with a bevy of new taxes and tax changes affecting their incomes, investments, businesses, estates, retirement funds, and other assets.

Neal’s plan pares back some of the ambitions from the Biden administration’s initial $3.5 trillion tax plan, rejecting a key White House proposal to tax the inheritances of the very wealthy and offering less aggressive changes for both domestic and multinational firms. And Democrats still have not completely rallied behind the package yet, with some members studying the details as votes are expected in the coming days.

But economists and tax experts say the proposal — which has White House support — amounts to the first major effort in Congress to address the populist political fervor over the gap between America’s ultrarich and its middle-class that has widened to levels unseen in nearly a century. The fears of a tax system unduly weighted to the rich have only intensified during the pandemic. Since 2019 alone, the wealth controlled by the top 400 people in America increased by $1.4 trillion, according to Gabriel Zucman, an economist at the University of California, Berkeley.

Democrats face numerous remaining hurdles in enacting the legislation, which is entangled with broader negotiations over the $3.5 trillion spending package. They also face amplifying GOP attacks alleging that the tax hikes will hurt middle-class families, drain investment, and strain economic growth. National Republican Senate Committee spokesman T.W. Arrighi said Monday that Democrats’ plans would “not only impact the rich” but hit “nearly every American.” House Democrats tried to blunt some of these criticisms by designing the proposal to put the lion’s share of tax increases on wealth earned by the most rich.

While preliminary estimates suggest Neal’s tax plan would raise roughly $2.6 trillion, Democrats say their $3.5 trillion package is fully paid for because it makes up for the remaining revenue by cutting costs on prescription drugs and from “dynamic scoring,” or assuming higher economic growth leads to more government tax revenue.

“This is a critical time. The magnitude of the inequality in America today is much larger than it’s been in years. We are in an era not seen since the Gilded Age at the end of the 19th Century, or the Roaring ‘20s right before the Great Depression,” said Joseph Stiglitz, a Nobel Prize winning economist at Columbia University. “The question is: Will our political system be dictated by the vast majority of Americans, or a small minority of vested interests who want to keep their goodies for themselves?”