Kim Flores, a retired accountant showing off his restored horizon-blue 1949 Cadillac, said he has supported Democrats for years, but the tax plan is causing him to reconsider.
“Increasing taxes on the rich is just nonsense,” said Flores, 72. “I completely agree that middle-
income people are hurting versus the higher-income people, and that is just wrong. But what are you going to do?”
Emboldened by major state-level gains in 2018, Democrats in Illinois are pressing to raise taxes on the rich to address long-neglected needs, such as schools and roads. Plans to raise taxes on the rich also have been considered in New Mexico, Connecticut, New York and New Jersey this year.
So far, however, the tax plans have met stiff resistance, even among some fellow Democratic leaders, who worry that they will alienate the wealthy suburban voters who were critical to the party’s success last year.
Suburban voters revolted against President Trump in the 2018 midterm elections, handing Democrats seven governorships and more than 300 state legislative seats, as well as control of the U.S. House. Democrats now control the governor’s mansion and both legislative chambers in 14 states, up from seven.
Many of these new officeholders campaigned explicitly on a pledge to raise taxes on the rich to address rising income inequality, as well as to meet a backlog of needs left by their tax-cutting Republican predecessors. The idea is also animating the 2020 Democratic presidential campaign, with leading candidates proposing to roll back tax cuts for the wealthy championed by Trump and impose new levies on the richest Americans.
The fight is raging in New Jersey, where the Democratic governor, Phil Murphy, is pushing a plan to raise the top marginal tax rate from 8.97 percent to 10.75 percent on income over $1 million.
Murphy, who succeeded Republican Chris Christie in 2018, says New Jersey voters elected him to spend more money on schools and transportation while tackling the state’s $200 billion debt. Murphy said Christie had failed to adequately fund the state services residents rely on.
“I inherited a state where the middle class has been hollowed out, if not ravaged by my predecessor, and I have been elected to fix that,” Murphy said in a recent interview. “We have been making enormous investments from Day One, and I can’t justify [the middle class] paying for it.”
Though the plan would affect just 19,000 wealthy households, Democratic legislative leaders are resisting, and the state is barreling toward a government shutdown July 1 unless the impasse can be resolved.
New Jersey Senate President Stephen M. Sweeney (D) is among those leading the opposition. Citing a recent Bloomberg News analysis that suggests the rich are fleeing high-tax states such as New Jersey for low-tax Sun Belt states such as Florida, Sweeney said he worries that a tax hike would accelerate those trends while undermining support for Democrats, who picked up four congressional seats in New Jersey last year.
“We are socially progressive, support raising the minimum wage, pay equality and marriage equality, pro-labor,” Sweeney said in an interview. “But on taxes, we can’t just let this go the way it’s going because we will lose seats. We will absolutely lose seats.”
Last month, Connecticut Gov. Ned Lamont (D) successfully fought off a major push by Democratic lawmakers in that state to impose a 2 percent surcharge on capital gains for couples earning more than $1 million a year and individuals earning more than $500,000. Lamont said that Connecticut residents had “tax fatigue.”
But state Rep. Anne Hughes (D), co-chair of the Democratic Progressive Caucus, vowed to keep pushing for the proposal.
“I kept telling the governor, ‘You represent the whole of Connecticut’s 3.5 million people, and most of them are just $500 away from financial catastrophe,” Hughes said, adding that lawmakers “just want those who benefited from federal tax cuts to reinvest those savings back into Connecticut.”
In New Mexico, where Democrats gained complete control of the Santa Fe statehouse in 2018, the state Senate dialed back a House proposal to raise the top tax rate to 5.9 percent from 4.9 percent on individuals earning at least $210,000 a year, or $315,000 for a married couple. The compromise calls for the higher tax rate to take effect in 2021 — but only if the state’s oil-based revenue stream registers less than 5 percent growth.
Nora Meyers Sackett, a spokeswoman for Gov. Michelle Lujan Grisham (D), called the law “an important step to restore progressivity to the personal income tax” while protecting the state budget “from shocks associated with the oil and natural gas industries.”
Here in Illinois, Pritzker, a billionaire heir to the Hyatt hotel fortune and private equity investor from Chicago, campaigned on the issue of tax fairness, saying that wealthy people could afford to pay more to fund government, particularly local schools. Pritzker was elected with 55 percent of the vote and won several traditionally Republican counties in exurban Chicago.
Shortly after taking office in January, Pritzker began pushing to eliminate the state’s 4.95 percent flat tax, which had been enshrined in the state constitution since 1970.
“Illinois’s flat tax system is unfair to the middle class and to those who are striving to get to the middle class,” Pritzker said last fall. “People like me should pay more, and people like you should pay less.”
Backed by the state’s labor unions, including the politically powerful teachers union, Pritzker persuaded a supermajority of legislators to support putting the issue on the 2020 ballot. If voters approve the referendum, Pritzker and lawmakers have tentatively agreed to raise the top tax rates to 7.75 percent on income over $250,000 a year and to 7.99 percent on income over $750,000.
According to an analysis by the Daily Herald, a newspaper in suburban Chicago, 85 percent of the affected residents live in Chicago and its suburbs, an area that is expected to play a major role in Democratic efforts to retain control of the House of Representatives in next year’s elections.
Barrington, for example, is an affluent commuter town marked by spacious homes and a charming historic district that dates to the 1800s. The town’s 10,000 residents have a median household income of about $111,000, according to the U.S. Census Bureau — nearly twice the national average. Nearby Inverness, Barrington Hills and South Barrington — where gated communities and equestrian estates are wedged between country clubs and dense, marshy forests — are even wealthier.
Since the 1970s, the area has been represented in Congress by Republicans. But last year, Democrat Sean Casten ousted Republican Peter J. Roskam to help Democrats reclaim the U.S. House. Casten campaigned against the Trump tax cut and vowed to support higher taxes on millionaires to help close the federal budget deficit.
Most of Barrington is represented by a Republican in the state Senate, however, and state Sen. Dan McConchie said he thinks Pritzker’s plan to get rid of the flat tax will backfire in places such as Barrington.
“With this now on the ballot, people in wealthy and middle-
income areas are thinking . . . Democrats just have an insatiable appetite for their money,” McConchie said.
Casten declined to comment.
Several recent polls have shown broad public support for raising taxes on the wealthy, although support can drop considerably when voters are presented with specific income groups who would be affected.
In January, a Fox News poll found that 70 percent of voters, including a majority of Republicans, favored raising taxes on families earning more than $10 million per year. But when asked whether they would support raising taxes on incomes over $250,000 per year, voters were split, with 48 percent opposed compared with 44 percent in favor.
Even in Democratic-leaning states, voters are showing signs of being reticent to tax the wealthy.
In Colorado and Maine, voters rejected ballot referendums last fall that would have raised taxes on six-figure wage earners to pay for public education in Colorado and universal home health care in Maine.
Analysts disagree about how the issue will break in next year’s elections. Andy Ballard, an assistant professor and fellow at American University’s Center for Congressional and Presidential Studies, said that demographic changes have weakened Republicans’ onetime advantage in well-off suburbs but that Democrats should be wary of overemphasizing the tax issue.
“Democrats can win, or hold, in suburban districts, but it’s going to take a lot of campaign artistry to get people to think, ‘Well, even though I am affluent, this tax probably won’t affect me,’ ” Ballard said.
But David Wasserman, the House editor at the Cook Political Report, said the tax debate is likely to have a limited impact in wealthy suburban areas where Trump has driven highly educated voters so far from the GOP that they are unlikely to return anytime soon.
“These voters’ aversion to Trump and Trump’s politics is now more cultural than economic,” Wasserman said, “and that makes it exceedingly difficult for Republicans to claw their way back in upscale suburbs.”
That dynamic is at play in Barrington, where multiple Trump voters said they were unhappy with the president’s style and policies, including the 2017 tax cut, which primarily benefited large corporations and the very rich.
Rajeev Parekh, 53, who owns a consulting business, said he likes some of Trump’s policies but mostly votes for Democrats because he worries that the poor and middle class don’t seem to be able to get ahead in America. Though he said he would personally prefer a tax cut, Parekh said he views Pritzker’s tax plan as an investment “in making this a better place for everyone.”
“I just feel as a country, we have a lot of needs to take care of,” Parekh said.
At Barrington’s weekly classic car night, Danny Stegeman, 71, was showing off a 1966 Corvette that he said is worth $100,000 — part of his stable of five cars and two boats. A retirement planner and former trader, Stegeman is a Republican, but he said he did not vote for Trump in 2016 and will not support him in 2020 because he doesn’t like the president’s personality.
Still, Stegeman said he isn’t sure he can support a Democrat, either — in part because of Pritzker’s tax plan.
“All of us have worked hard our entire life, often started with nothing. Now they want to tax us after we worked our a-- off?” Stegeman said.
“The Democratic way is: ‘Well, you have more than me, so now you have to share.’ Well, I say, ‘No, no, no.’ ”
Scott Clement contributed to this report.