How Dems Can Show the Working Class They Truly Care

Today’s post is about the increased influence of billionaires in our politics, new Democratic efforts to make the tax code more friendly to the majority of Americans, and my view on what changes could be made in that regard.

Sadly, my streak of being slightly ahead of Paul Krugman is going to end at 2 posts (and will probably never happen again). Here is his post from yesterday:

This is in conjunction with a New York Times article from 2 days ago:

The tl:dr on the article: In 2003, billionaires accounted for about 0.3% of campaign contributions. In 2024 (post Citizens United), that increased to approximately 19%, an increase of about 6,233%. Staggering and disgusting.

Also, recently Senators Chris Van Hollen and Cory Booker proposed tax code changes to ease the burden on the “middle class”.

Booker’s proposal - the “Keep Your Pay Act” - includes:

• Increase the standard de)duction to $37,500 for each individual

• Increase the Child Tax Credit

• Expand eligibility for the Earned Income Tax Credit

• Slightly increase the top marginal tax rate

Van Hollen’s proposal includes:

• No income tax for those earning below a living wage (about $46,000)

• Somewhat lower taxes for those earning above the “living wage” floor

• A significant new surtax (progressively increasing up to 12%) on those earning $1 million and up per year

Let me clear right here. These are all decent proposals that would, indeed, lower the tax burden on most people. Pretty standard stuff though. Are they enough to move the needle? To break through with voters? To exploit people’s general anger at the growing divide between the haves and the have nots.

I’m not so sure (ok, I really don’t think so, and full disclosure, I’m a big Van Hollen fan).

Finally, I’ll repeat my chilling example of what obscene wealth looks like. Elon Musk is now estimated to be worth over $800 billion. You read that right - $800 billion. If someone makes, and takes home, $1 million per year, it would take a mind-boggling 800,000 years to accumulate $800 billion. That is unacceptable in a small-d democratic society.

Do I have some thoughts? You know I do.

How do we show voters that we are for real and we are willing to fight entrenched interest and elites that don’t give a shit about the struggles/concerns of the vast majority of people in the U.S.? In my view (using a really poor taste military analogy), shoot some missiles in a very targeted way directly at the perks of power enjoyed by the obscenely wealthy (perks that 99% of people in this country will never get to enjoy).

This list is non-exhaustive, but it’s a start. Here goes.

• Get rid of the Carried Interest Rule for hedge fund and private equity parasites. In layman’s terms, make them pay the ordinary income same tax rates as regular working people instead of enjoying capital gains tax rates on risking only OPM - Other People’s Money. There is literally no economic reason for this - it only exists because rich people have influence over the elected officials who write the tax laws.

• Get rid of “Stepped-Up Basis” for stock passed on to heirs. In layman’s terms, when a person dies and passes stockholdings to their heirs, make the heirs pay the capital gains tax on the increase in the stock price from when it was purchased to when it is passed on. Why? Becuase this is passive income to the heirs. Currently, and insanely, no one ever pays tax on the stock’s increase in value when it is transferred. Ever. This is just a means of ensuring heirs who were lucky enough to be born to the wealthy can enjoy dynastic wealth without lifting a finger. Again, there is literally no economic reason for this - it only exists because rich people have influence over the elected officials who write the tax laws. BTW, there is already a significant annual gift tax exemption wealthy people can use while they are alive to transfer money to heirs.

• Re-institute a micro transaction tax on trades of financial instruments. We used to have a Financial Transactions Tax (FTT, or “documentary stamp tax) from 1914 - 1965. Some estimates are we can raise $220 billion/year with an exceedingly small tax of 0.5% on stocks, 0.1% on bonds, and 0.005% on derivatives. Yep - $220 billion per year. While somewhat more than half of Americans indirectly own stocks through company retirement accounts estimates are that no more than 15% of Americans directly own stocks/financial instruments. A nice side benny of this proposal is the likely reduction in stock speculation.

• Increase the estate tax and make it stick. This is really an inheritance tax on lucky heirs. Much like “Stepped-Up Basis”, passing on ones accumulated wealth to heirs is simply passive income to those heirs based solely on the circumstances of their birth. Teddy Roosevelt argued for the inheritance tax in order to avoid the inter-generational landed aristocracy that led to gross economic/power inequality in Old Europe. Yes - allow some reasonable transfer of wealth and exempt true small businesses, real working ranch and farm lands. Find a way to include trusts so the wealthy can’t evade the tax so easily. Michael Green has a way too dense analysis HERE, but the gist is that taxing wealth after accumulation and redistributing is the best way to reduce inequality (trust me - tl:dr).

• Institute a wealth tax. Yes, this one is controversial. The wealthy argue their wealth held in stocks may decrease over time. But let’s be clear - we already have a wealth tax on every single homeowner in this country. It’s called the property tax. And no one gets a refund for past property taxes paid if the value of their house goes down in the future. So why not have a similar “property tax” for personal “property” (i.e., assets) the super wealthy possess?

What I like about these options is they are directly targeted at the wealthy, show some gumption that Democrats are willing to buck their corporate/wealthy donors to actually help out the “little” people, will have a significant positive impact on our budget deficit, and show some standout creativity (i.e., may actually capture people’s attention vs. simply seeming to “tinker” with the existing tax code.

Sure, mix, match and/or pair these with some of Van Hollen’s and Booker’s ideas. But it’s time to be bold and loud and show people who live here and pay taxes that it’s not about billionaires and everybody else.

And yeah - we can quibble and argue and nitpick until we end up doing nothing (isn’t that the way it’s always been?). But if Dems ever want to rise up in the popularity rankings and not just bank on being anti-Trump, people want to see some fight and standing up for “regular” people.

It’s time.

Thoughts?

PS - I could add in funding the IRS to go after wealthy tax cheats (as I’ve previously argued) but that may be for another day…