Raise Taxes on the Rich, or Cut Them?

Plus, Dems want to cut the deficit in half By Yuval Rosenberg and Michael Rainey Raise Taxes on the Rich, or Cut Them? Democratic Sen. Elizabeth Warren and Rep. Alexandria Ocasio-Cortez have sparked intense debate this month by proposing higher taxes on the rich, with Warren calling for a [wealth tax]( and Ocasio-Cortez proposing a [70% top marginal tax rate](. Senate Republicans — well, they’re moving in the opposite direction. Three top GOP senators on Monday [reintroduced legislation]( to permanently repeal the federal estate tax. The legislation was put forth by Sen. John Thune of South Dakota, the No. 2 Republican in the Senate, and is being co-sponsored by more than two dozen other Senate Republicans, including Majority Leader Mitch McConnell of Kentucky and Senate Finance Committee Chairman Chuck Grassley of Iowa. The 2017 GOP tax overhaul already reduced the number of estates subject to the tax by roughly doubling the value of assets that can be excluded from the tax. This year, the new law exempts estates worth less than [$11.4 million]( meaning that couples filing jointly can pass along up to $22.8 million before facing the tax. In its current form, the estate tax would be paid by only about 1,700 families, according to the Tax Policy Center. That’s down from about 5,500 taxpayers who would have faced the tax under the previous law. The reduction of the estate tax is set to expire after 2025. What the American public says: Polling has found tax increases on the wealthy to be popular. A survey earlier this month by [The Hill and HarrisX]( found that 59 percent of registered voters, including 45 percent of Republicans, support increasing the top income tax bracket to 70 percent. A Fox News poll released last week found that 70 percent of voters favor tax increases on families making over $10 million a year and 65 percent favor tax hikes on incomes over $1 million annually. (That poll also found that 51 percent of voters want to spend more on programs such as infrastructure, defense, education and health care). Those numbers suggest that a full repeal of the estate tax might be about as popular as the polar vortex. “The quest for a tax cut even less popular than the TCJA is now over,” Len Burman of the Tax Policy Center [tweeted]( referring to the proposed repeal. But as Karlyn Bowman of the right-leaning American Enterprise Institute [noted back in 2017]( Americans have historically had at least some reservations about the estate tax. Why it matters: The new GOP bill is unlikely to go anywhere over the next two years, but it signals that the party still prioritizes eliminating what many conservatives call the “death tax.” As Democrats call for increasing taxes on the richest Americans, the GOP legislation also indicates how vast the gulf is between the two parties on the issue. “On the right, death is not a taxable event, and the estate tax represents double taxation and an administrative headache,” Brian Riedl, an economist at the conservative Manhattan Institute think tank, told [The Washington Post](. “On the left, the estate tax is a vital source of eliminating inequality. It’s a completely different framework.” More on the Debate Over Taxing the Rich: - [Why Taxing the Rich May Not Save Democracy]( – Zachary Karabell, Wired - [Soaking the Rich? It Could Backfire for Progressives]( – Noah Smith, Bloomberg - [Taxing the Rich Is an Idea Whose Time Has Come — and Gone]( – Stephen Mihm, Bloomberg - [What Is the Purpose of Raising Taxes on the Wealthy?]( – Nancy LeTourneau, Washington Monthly - [Inside the Warren Vs. Harris Battle Over Tax Progressivity]( – Howard Gleckman, Tax Policy Center - [Warren’s Push for a Wealth Tax Could Be a Game Changer]( – Katrina vanden Heuvel, Washington Post - [Elizabeth Warren Does Teddy Roosevelt]( – Paul Krugman, New York Times - [What Psychology Says About How Envy and Compassion Motivate Tax Preferences]( – Cato Institute Blog Quote of the Day “The men and women who clean and secure federal buildings have been living on the edge of disaster for five weeks. Many of these workers are facing eviction, power shut-offs, hunger and even going without lifesaving medications. And unlike direct federal employees, they may never be made whole.” – Héctor Figueroa, president of the 32BJ SEIU labor union representing 170,000 service workers on the East Coast, in a Washington Post article, [“The Lowest-Paid Shutdown Workers Aren’t Getting Back Pay”]( GOP Tax Cuts Having Little Effect on Business Investment: Survey The Republican tax cuts don’t seem to be inspiring companies to boost their investments or hire more workers, according to the latest business conditions [survey]( from the National Association of Business Economics, released Monday. “A large majority of respondents—84%—indicate that one year after its passage, the 2017 Tax Cuts and Jobs Act has not caused their firms to change hiring or investment plans,” said Kevin Swift, president of NABE and chief economist at the American Chemistry Council. The results are similar to those in the October survey, which found that 81 percent of respondents reported no effects from the tax cuts. The goods-producing sector may be the exception to the rule, the survey found, with most firms noting increased investment, and some reporting funds being redirected to the U.S. The survey was conducted with 106 NABE members in a variety of industries between December 17, 2018, and January 9, 2019. Wait 'Til Next Year? Despite the lack of evidence that the GOP tax law is producing the increased growth and investment promised by Republicans, the corporate tax cuts still have plenty of defenders. James Pethokoukis of the American Enterprise Institute, for example, [says]( that it’s just too early to judge the tax cuts on the basis of business investment and hiring — and while increased investment has seemed minimal over the first year, other factors such as increased federal borrowing and rising trade tariffs, may have offset the pro-growth effects of the tax cuts. Over the longer-term, though, the economic theory behind the cuts still holds, he argues. On the other hand, critics of the corporate tax cuts say the explanation for weak investment is much simpler. Responding to the NABE report, Mike Konczal of the Roosevelt Institute [writes]( “in an era with record-high capital market payouts and where interest rates are so low central bankers debate making them negative, the cost of capital isn't a major constraint on investment.” When investment capital is already cheap and readily available, the argument goes, it makes sense that a reduction in tax rates would do little to inspire more investment. So far, the data appears to be on the side of the critics. Key Democrat Says He Wants to Cut the Deficit in Half Rep. John Yarmuth (D-KY), chair of the House Budget Committee, [told]( Reuters Tuesday that Democrats are working on a fiscal plan that would cut the annual deficit in half in 10 years. While it won’t be easy to cut the deficit by “half a trillion dollars” by 2029, Yarmuth said that options for achieving the reduction could include raising the corporate tax rate to 26 percent or 27 percent, up from the 21 percent enacted by Republicans in 2017. Even then, headwinds from trade wars, slowing economies around the world and a possible recession in the U.S. could weigh on the effort. Increased spending could also complicate matters as Democrats push to expand Medicare, boost public education and respond to global warming. Yarmuth said that while he hopes to vote to expand Medicare this year, he plans to counsel restraint to the growing number of progressives in the House. “We have some members I believe in the caucus who believe in the theory that you can spend whatever you want to spend. And I don’t think that’s possible,” Yarmuth said. Despite their big plans, Democratic lawmakers may see limited results, given the reality of Republican control of the Senate and the White House. “It’s fair to say that virtually everything the Democratic majority in the House will be doing for the next two years will be demonstrating a different vision for the country and direction for the country,” Yarmuth told Reuters. News - [Kamala Harris Backs Medicare for All and She Isn’t Messing Around]( – HuffPost - [Graham Urges Trump to Tie Debt Limit to Border Security Funding]( – CNN - [Trump’s 2020 Budget Delayed by Shutdown]( – The Hill - [McConnell Open to Anti-Shutdown Legislation]( – Politico - [Janitors, Cooks, and Other Government Contractors Are Still Fighting for Back Pay]( – New York - [Howard Schultz: America Doesn’t Want Far-Left Ideas Like Ocasio-Cortez’s 70% Marginal Tax Targeting the Wealthy]( – CNBC - [US Consumers Rattled by Shutdown, Roiling Markets]( – Associated Press - [GoFundMe CEO Says One-Third of All Fundraisers Are Now for Medical Reasons]( – The Hill - [America’s Love Affair With Cheap Drugs Has a Hidden Cost]( – Bloomberg - [Harvard Study Finds Older Insulins Are Safe as Well as Cheaper]( – Bloomberg - [Obamacare Helps Save Low-Income People from Losing Their Homes, Study Shows]( – CNBC - [Harley-Davidson Profit Is Wiped Out by President Trump’s Tariffs]( – Bloomberg - [Pentagon Chief Backs Watered-Down Space Force in New Setback for Trump]( – Politico Views and Analysis - [The Debt Is Still Out of Control]( – Robert J. Samuelson, Washington Post - [The Federal Deficit Is Headed for $1 Trillion. Should We Care?]( – Howard Gleckman, Tax Policy Center - [Kamala Harris Endorses Elimination of Private Health Insurance. That’s a Huge Political Risk.]( – Jonathan Chait, New York - [Howard Schultz Wants a President Who Will Tell Billionaires Their Favorite Lies]( – Eric Levitz, New York - [The Math Problem That Could Sink the Bernie/AOC Agenda]( – Alan Cole, Manhattan Institute - [The Democratic Promise of Ocasio-Cortez, Warren and Sanders]( – Jamelle Bouie, New York Times - [How to Choose Among Tax Credits that Aim to Support Work, Children, and Poverty Reduction]( – Elaine Maag, Tax Policy Center - [If Trump Wants Another Shutdown, Republicans Won’t Stop Him]( – Ramesh Ponnuru, Bloomberg - [Don’t Overthink This. Trump Lost the Shutdown.]( – David Byler, Washington Post - [The Shutdown Might Have Accomplished at Least One Thing]( – Jennifer Rubin, Washington Post - [Pfizer's Subpar Outlook Embodies Pharma's Plight]( – Max Nisen, Bloomberg Copyright © 2019 The Fiscal Times, All rights reserved. You are receiving this newsletter because you subscribed at our website, thefiscaltimes.com, or through Facebook. Our mailing address is: The Fiscal Times 399 Park AvenueNew York, NY 10022 [Add us to your address book]( If someone has forwarded this email to you, consider signing up for The Fiscal Times emails on our [website](. Want to change how you receive these emails? You can [update your preferences]( or [unsubscribe from this list](