President Joe Biden is asking congressional Democrats to vote for a tax increase that will test a long-held liberal article of faith: that many wealthy Democrats won’t mind paying more in taxes if they can be convinced the money would lead to greater prosperity for everyone.
Democrats now represent 65% of taxpayers with a household income of $500,000 or more, according to pre-pandemic Internal Revenue Service statistics. And as Congress begins considering Biden’s $2.25 trillion spending and tax proposal, Democrats are being explicit with their constituents about how much it’ll cost them—and how much they say it will begin to address issues like income inequality.
The sales pitch reflects their theory that wealthy Democrats will support paying higher taxes because of a changed economy and a political realignment that’s put cultural issues ahead of traditional pocketbook issues in voters’ minds.
“Many of my constituents would be willing to pay the bill if what they’re paying for is visible, tangible and useful to them,” said Tom Malinowski, a Democrat who represents a wealthy New Jersey district.
Former President Donald Trump accelerated the Republican Party’s transformation from the well-heeled party of big business to a more populist, working-class profile.
In 1993, the last time a president asked Congress to vote in a significant tax hike, the typical congressional district represented by a Republican was 14% richer than the typical Democratic district, according to household income data from the Census Bureau. By 2020, those districts were 13% poorer.
An anti-tax ethos remains part of the party’s DNA, even as fewer Republican voters would pay the tax increases directly. Nearly three-quarters, or 74%, of taxpayers in Republican districts had a household taxable income of less than $100,000, according to the IRS statistics, and wouldn’t see their income tax rate rise under Biden’s plan.
Republican members of Congress are more dependent than Democrats, though, on PACs that represent corporate interests. In 2016, House Republicans received about twice the donations that Democrats did from corporate political action committees. In 2020, business-interest PACs gave $181 million to Republicans and $135 million to Democrats.
After pushing a $1.9 trillion pandemic recovery bill through Congress on party-line votes, Biden has outlined even more spending to build or repair infrastructure and to buttress social welfare programs, which he argues would benefit working- and middle-class taxpayers.
The new spending would be partially paid for by an increase in the corporate tax rate—to 28% from 21%—and by returning the top rate for individuals to the 39.6% of the Clinton and Obama eras. Biden has promised that no household making less than $400,000 a year would pay more in taxes.
“I think President Biden gets it. He’s selling this plan primarily as a way to rebuild America,” Malinowski said. “That all makes sense to the people I represent. That’s an investment with an high return.”