Another viewpoint editorial: Listen to the warnings of ‘Tax Armageddon’

The Wall Street Journal

That headline isn’t our phrase. It comes from Virginia Sen. Mark Warner, who like other Senate Democrats has been laying out in public the party’s tax strategy for the next Congress. Democrats are saying out loud that they plan to use the scheduled expiration of the 2017 tax cuts at the end of 2025 to insist on the largest tax increase in history.

“The main goal here is this can’t just be a debate about the 2017 tax cuts,” Warner told Bloomberg News. “This is going to be Tax Armageddon.”

Oregon Sen. Ron Wyden, who runs the Finance Committee, recently revived his pitch to tax the appreciation of assets for those with at least $100 million in income. Wyden plans to run through the door on wealth taxes that the Supreme Court left open in a recent lamentable decision.

Wyden floated his version of a wealth tax in 2021 to pay for President Biden’s Build Back Better plan. Opposition from Joe Manchin and Kyrsten Sinema scuttled the $4.8 trillion bill, but both are leaving the Senate.

Sen. Elizabeth Warren last month said she’ll hold the middle-class tax cuts that expire in 2025 hostage if Republicans don’t agree to soak corporations and people who earn more money than she thinks they deserve. “Better to let all the Trump tax cuts expire than be accomplices to another slash-and-burn tax bonanza for America’s billionaires,” she said. Her plan also includes a 2% annual tax on the net worth of households with more than $50 million in assets.

The Massachusetts senator rebuked Barack Obama for agreeing to extend the Bush middle-class tax cuts as part of the 2012 “fiscal cliff” deal with Republicans in Congress. Recall that the 2012 deal that Biden helped negotiate raised the top marginal individual tax rate to 39.6% from 35%, plus the top tax rate on capital gains and dividends to 23.8%.

She blamed that extension — and huge tax increase — for blowing up the deficit. “Once Obama made that tax cut deal with Republicans, the federal deficit ballooned,” she said.

Well, no. The deficit didn’t balloon until the pandemic when both parties agreed to throw a spending party under the guise of COVID relief. Then Democrats kept partying long after the emergency was over.

The government is still running $2 trillion in annual deficits even though the economy is growing and taxes as a share of GDP are roughly the historical average. Spending has driven the deficits and is now at 24.2% of GDP, well above the 21% modern average.

Warren added in her speech that “Joe Biden is right: if the 2025 tax bill doesn’t call on wealthy people and giant corporations to shoulder a bigger share of what it costs to run this country, Democrats should reject it outright.”

The Warren position conflicts with Biden’s promise not to raise taxes on anyone earning less than $400,000. Note that Pennsylvania Sen. Bob Casey, who is running for re-election this year, also didn’t close the door to raising taxes on those earning less than $400,000. “We haven’t made decisions about that yet,” he told Roll Call.

Is this Biden’s negotiating position if he is re-elected with Republican control of one or both chambers of Congress? If so, he ought to tell voters.

All of this raises the tax stakes in this year’s election more than most voters appreciate. Biden will keep repeating his talking point about taxes not rising for anyone earning more than $400,000, but if his first term is a guide he’ll be taking orders from the Wyden-Warren faction in the Senate.

They’ll be happy to raise taxes on the middle-class as well as the affluent because they know there aren’t enough rich to finance their vast spending plans. Tax Armageddon is right.