Jacquelyn Martin/AP Photo
President Joe Biden talks about expanding the Child Tax Credit at the Washoe Democratic Party office in Reno, Nevada, March 19, 2024.
Enormous amounts of presidential election messaging and coverage will unfurl between now and November 5. You will surely hear a lot about abortion, immigration, and inflation. You will hear about a fight for the future of American democracy. Even more likely, you’ll hear about polls, strategies to attract working-class and minority voters, or what one candidate said or tweeted or posted, or designated a surrogate to say or tweet or post. Oh, and court cases. Lots and lots of court cases.
What you might not hear as much about are the stakes of the election’s outcome for all the money in the country. On Tax Day, of all days, it seems like a good time to lay that out.
Nearly all of the provisions of the 2017 Trump tax cuts affecting individual tax returns expire at the end of 2025. Who is in control of the government at that time will depend, of course, on the outcome of the elections. The people then in charge will determine the next American tax policy, and economic and fiscal policy.
Will we simply make permanent the Trump tax cuts, with all their attendant inequities? Will we revert back to an Obama-era tax code that still has too many of the assumptions of Reagan-era tax policy embedded within it? Or will we use the moment to revolutionize tax policy and make a lasting break with the past four decades of trickle-down? The choice here will determine whether we use revenues generated by a new tax code for benefits for the American people, or forsake them in favor of shielding the wealthy and well-connected from paying their fair share.
“The tax code is the last living thing of trickle-down economics,” said Elizabeth Pancotti, a former adviser to Sen. Bernie Sanders (I-VT), who is now director of special initiatives at Roosevelt Forward. Pancotti has a paper out today framing the looming expiration of the Trump tax cuts as an opportunity rather than a challenge. “If we can’t fix this, for all the strides we’ve made in Bidenomics, I’m not sure we can build something that lasts.”
The Biden campaign has not been shy about raising these issues, though Trump kind of has. That contrast reveals the potential Democratic advantage on taxes, provided voters become aware of it. But taxes have not played a role in the basic narrative of the campaign, at least not commensurate with the impact they’ll have. As Pancotti says: “The stakes of this election are: Will Elon Musk pay more or less on his taxes in 2026?”
A FULL EXTENSION OF THE TRUMP TAX CUTS would cost somewhere between $250 billion and $350 billion every year, according to Steve Wamhoff, federal policy director at the Institute on Taxation and Economic Policy. This would increase the nation’s primary annual deficit (not including interest on the debt) by about one-third. By contrast, the tax proposals announced by President Biden would bring in an estimated $5 trillion over a ten-year period. About $3 trillion of that would be offset by his tax cuts on lower-income households. The Wall Street Journal puts the total difference between the two leading presidential candidates on tax policy at $6 trillion.
It’s actually more than that. Trump and his allies have broader designs then just making his tax cuts permanent, including more tax cuts for the wealthy and corporations. The expanded health insurance subsidies for the Affordable Care Act, which have led to the largest number of enrollees on the insurance exchanges in history, expire at the end of 2025. That will get folded into the debate. A bipartisan deal that trades a modest expansion of the Child Tax Credit for the revival of expiring business tax measures, which passed the House this year but is unlikely to pass the Senate, will also likely be on the table.
Put all that together and you have a tax battle royale, with a 13-figure sum of money on the line.
The expiring Trump tax cut provisions can be sorted into three different buckets, Wamhoff said. First, there are changes for individuals and families, the kind of things that are very prominent on tax returns: the standard deduction, the deductions for state and local taxes (SALT), and the Child Tax Credit. The Trump tax cut actually expanded the CTC to $2,000 per child, and if nothing is done it will be cut in half to $1,000. (Democrats expanded the CTC in 2021 to as much as $3,600 per child, but that provision expired at the end of that year.)
Nearly all of the provisions of the 2017 Trump tax cuts affecting individual tax returns expire at the end of 2025.
Second, you have cuts to taxes on “pass-through” business income, which is complicated but mostly affects individual business owners, who in general are the richest people in the country. And finally, you have the cut to the estate tax, which now exempts the first $13 million of estate holdings. Pancotti’s paper shows that the number of taxpayers subject to the estate tax fell from 28,000 in 1982 to 2,600 in 2021, a more than 90 percent reduction.
Corporate taxes don’t expire in 2025, but they have been pushed into this debate. The Trump tax cuts dropped the corporate tax rate from 35 percent to 21 percent. Biden has talked about raising it to 28 percent, about halfway back to the Obama level of 35 percent. (A current corporate minimum tax of 15 percent, designed to prevent excessive deductions and tax avoidance, would be increased to 21 percent under the Biden plan.) Trump, on the other hand, has mused about 15 percent, and Project 2025, the blueprint for a conservative presidency, endorses 18 percent.
Biden’s $5 trillion in proposed increases come exclusively from businesses and the wealthy; he would extend all the Trump tax cuts for families making less than $400,000 a year, at a cost of around $2 trillion. (Another $1 trillion would be spent to bring the CTC back to what Biden signed into law in 2021.) It is rather incredible that you can wring $5 trillion exclusively from the top 2 percent of income earners in the country and corporations, but given that Biden isn’t even pushing corporate tax rates back to the Obama standard, he probably has even more room to go.
In addition to raising the corporate tax rate, Biden would move the top individual tax bracket back to 39.6 percent, where it was under Clinton and Obama. The pass-through and estate tax changes for the wealthy would be reversed. A “billionaire” minimum tax (it actually impacts those with wealth of over $100 million) would be enacted, requiring an effective tax rate for the ultra-rich of at least 25 percent. And reversing three large tax breaks on capital gains for the wealthy—including counting some unrealized gains as income, raising the capital gains tax rate for millionaires, and eliminating the “step-up in basis” so unrealized gains would be taxed after the holder dies (with an exemption for some households)—would yield another $800 billion. (Wamhoff has authored a breakdown of what all the Biden proposals would raise in revenue.)
“The Inflation Reduction Act included $300 billion in tax increases,” Pancotti explained, noting that most of the revenues in the IRA came from increased tax enforcement and prescription drug negotiation. “We are talking about ten and a half times that … Even if the Biden proposals are not perfect, $5 trillion in tax increases is something no Democratic president has ever talked about.”
MORE OFTEN THAN NOT, NATIONAL DEMOCRATS have been reluctant to talk about tax increases at all. In 1984, Walter Mondale ran on raising taxes and got a whopping 13 electoral votes. But he was talking about broad-based tax increases. The kinds of taxes Biden has advanced are overwhelmingly popular, to the extent that it’s Trump and the Republicans who have actually gone silent.
A recent Bloomberg poll found that 69 percent of voters in swing states support higher taxes on the wealthy, including a majority of Republicans. In some sense, the polling has always been this way, but both parties have finally clued into it. While Trump got a lot of attention for promising rich donors at a fundraiser that he would keep their taxes low, that was a closed-door event. He’s been careful to keep any sound bite to that effect away from a microphone.
For their part, Democrats have been pretty vocal. A large gathering of the Patriotic Millionaires last week in Washington featured remarks from numerous House Democrats from all factions of the party. Rep. Don Beyer (D-VA), chair of the Joint Economic Committee, speaking at a conference also put on last week by the liberal journal Democracy, forcefully contrasted Democratic tax proposals with the Republican theory of tax policy. “The Republican story—lower taxes for the rich because they will invest in all of us—has just not been true,” Beyer said, aligning himself with virtually all of Biden’s announced changes. “With the Trump tax provisions expiring, we have a great opportunity to move forward.”
The Biden campaign has planned a centerpiece speech on taxes on Tuesday in his hometown of Scranton, Pennsylvania. According to a preview of the speech, Biden plans to “drive home a simple question: ‘Do you think the tax code should work for rich people or for the middle class?’”
If it feels jarring to hear Democrats loudly discuss raising taxes, that’s only because it was such a forbidden concept for so long. A lot of politicians were simply afraid of being labeled as big-tax liberals.
That fearmongering will still be out there, of course. “The economic doomsaying will be heightened as they get closer to the election,” said former Biden chief of staff Ron Klain at the same conference Beyer attended. “CNBC will be a nonstop rotation of corporate leaders saying Biden will ruin the economy by raising their taxes.”
But reformers argue that this shouldn’t cause any Democrat to go so weak this time, when the public is resoundingly on their side. Weakness on taxes is also incompatible with the new robustness on activist government policy. Democrats have found new interest in public investment, and have long made rhetorical promises about equity and fairness and rebalancing economic power. Without a tax policy to match, those new ideas and promises will inevitably fail to take root.
“I don’t understand why we can’t say it’s good politics, good policy, and good economics for our tax code to look like this,” Pancotti said. “Our tax code incentivizes profiteering, stock buybacks, and massive CEO compensation—and it shouldn’t.”
