Now, Biden and Democrats are proposing an infrastructure plan that includes significant tax increases — what Republicans loathe above all else. And yet, early signs show GOP opposition to be just as weak and halfhearted as it was for the covid relief bill.
If you can’t count on Republicans to go to war against a tax increase, what is the world coming to?
Trust me, it’s not that they don’t object, or that they won’t continue trying to find the right message to derail the infrastructure bill. But this is a sign that decades of ludicrous arguments and laughably wrong predictions about taxes may finally be coming home to roost for Republicans — and even they may know it.
Biden’s proposal seeks to generate revenue from raising the corporate tax rate from 21 percent to 28 percent (which would still be lower than the 35 percent it was before the 2017 Republican tax cut). It also has provisions to keep corporations from avoiding taxes by moving their mailboxes overseas, and would close some other loopholes.
But while Biden has talked about raising taxes on high incomes, this proposal doesn’t increase individual taxes for anyone (though some congressional Democrats are floating ideas to raise taxes on the wealthy).
Perhaps if Biden’s infrastructure proposal raised the top individual income tax rate, Republicans would be angrier about it. But at the moment, they’re nodding to the idea that taxes are bad, then offering lame arguments that many provisions in the plan don’t meet one or another definition of “infrastructure.”
Even the groups representing big business seem muted in their response. They’ve put out statements (see here, here and here) praising Biden for wanting to spend on infrastructure but saying corporate tax increases shouldn’t pay for it, but they’re hardly crying that the sky is falling.
All this seems strange, given the righteous fury with which Republicans used to greet any suggestion of a tax increase. For instance, in 1993 they reacted to Bill Clinton’s first budget, which raised the top rate to 39.6 percent, by shouting that it would create a “job-killing recession” approximately 42 quadrillion times (what actually ensued was one of the most remarkable periods of economic growth in U.S. history).
The flip side of their argument that tax increases will spell economic doom is their claim that if we ease the crushing burden on corporations and the wealthy with tax cuts, economic nirvana will inevitably ensue.
It may be the failure of that argument — particularly with the 2017 tax cut, which is fresh in people’s memory — that hangs over this discussion. That bill was tremendously unpopular, and even though the economy was doing well in many ways before the pandemic hit, few seemed to attribute that to the tax cut. Though they couldn’t stop its passage, Democrats succeeded in making sure everyone knew who its primary beneficiaries were.
That tax cut only exacerbated the belief that corporations don’t pay their fair share of taxes, as 69 percent of Americans agreed in a 2019 Gallup poll. Which makes it harder to argue now that increasing the corporate rate is something we all should be afraid of.
It’s true that Republicans are saying the tax proposals in Biden’s infrastructure plan are bad. But you can almost tell that they don’t expect anyone to be persuaded. All of which is making this debate (so far, at least) oddly low-key.
We should also understand that Democrats are flexible on this topic: While they would like to see higher taxes for the wealthy and corporations, few have strong feelings about exactly how to do it. They want the system to be fair and they want it to generate revenue, but beyond that they’re fine with any number of approaches.
A few years ago I asked liberal economists what their fantasy tax system would look like, and the answers I got boiled down to: It doesn’t really matter that much. Unlike conservatives, liberals don’t believe alterations to the tax system produce wildly consequential changes in the behavior of people and companies, determining whether the economy rises or falls. As one economist put it, “We just want to pay for stuff.”
Republicans will probably never accept that idea, but they may be realizing that most other people do. After delivering so many predictions that some tax increase would send the economy into the gutter, or some tax cut would deliver a paradise of limitless prosperity — and then watching while those predictions were inevitably proven wrong — it’s gotten harder for them to claim that our futures depend on the outcome of a battle over taxes.
We’ve known for a long time that governing isn’t really the Republican Party’s thing, but they’ve always been great at opposition: raising doubts, generating anger, undermining Democratic presidents, and creating the sense that Washington is a broken mess.
But so far they haven’t been able to get that machine in gear to oppose Joe Biden. When they can barely work up the energy to fight a tax increase, you know something profound has changed.