Time for the Biden Middle Class Tax Cut
By Michael Ettlinger
[As with all my posts, unless otherwise indicated, the opinions expressed should be solely attributed to me and not to any organization with which I’m associated]
Joe Biden needs to offer something tangible to the millions of Americans who don’t feel that his presidency has benefited them. A tax cut might be just what they’re looking for and a great opportunity to offer a favorable contrast with Donald Trump.
As we hear constantly, Biden’s approval rating is rotten right now. It clocks in below 40%, below what Trump and every other president except Carter had at this point in their presidency. More importantly to the specific question of whether Biden needs to do more that directly helps people, a Wall Street Journal poll from December found that only 23% think that “Joe Biden’s policies” have “helped” them “personally” but 50% think that “Donald Trump’s policies,” when he was president, “personally” “helped” them. Plenty of other polls tell the same story.
Why is proposing a tax cut part of the answer? After 20 years of the public being relatively OK with the amount they pay in federal personal income tax, they now aren’t. In a Fox News poll from March 71% of people said they were “extremely” or “very” concerned about how much they, personally, pay in taxes. The long running Gallup poll question, “do you consider the amount of federal income tax you have to pay as too high, about right or too low,” now gets 60% registering “too high” —up sharply and the highest share in over 20 years. Nothing relevant has actually changed in tax law, so it’s unclear why the change in attitude. It could be inflation — people are feeling that they’re spending too much generally and that has re-focused them on how much they pay in taxes. It could be that their disgust with government has made them less inclined to pay for it (the percent that “trust” the federal government to “do the right thing” is at an historic low). It could be a mistaken impression that the taxes President Biden has raised, to support new spending initiatives, have included direct tax increases on them. In any case, the reason probably doesn’t matter — the point is that people are feeling that way and the President should take the opportunity to address it by offering a tax cut for working Americans and retirees.
It is a particularly ripe moment for the president to take this on, as the debate over an extension of the temporary parts of the 2017 Trump tax cut has started to gather steam. The Trump tax bill was a cut for all income groups, but was hugely skewed to the wealthy and has never been popular. Chances are that voters don’t particularly want an extension of all the expiring provisions, which would give a cool $113 billion to the richest 5% in 2026 alone. The contrast between what Biden could propose and an extension of all the Trump cuts would be an excellent way of showing who is on the side of most voters and who isn’t. It would be the “Biden Tax Cuts for the middle class” versus the “Trump Tax Cuts for the rich.” That’s better than the debate that will otherwise happen: “extend the Trump tax cuts for everyone” versus “only extend the Trump tax cuts for the middle-class.”
It’s also a great opportunity to talk about the Biden economic record. The only argument for cutting taxes for the wealthy is that they’re “job creators” and helping them helps everyone. It’s a weak argument any time, but particularly when Bidenomics has created the best jobs market in American economic history.
There are lots of ways Biden could design his alternative. My favorite is to replace the personal exemptions that Trump, to the detriment of middle-income families, eliminated in 2017. My rough math says that the money in the expiring tax cuts for the rich could cover a $500 per-person tax credit, if subject to the same high-income phaseout rules that were in effect for the personal exemptions. There are other things Biden could include. He has already proposed a first-time homebuyers credit which, given how prominently higher housing costs are playing into inflation concerns, might strike a chord. If the temporary “Biden child tax credit increase” currently being considered passes Congress, that could be extended. The parts of the Trump tax cuts that do help the middle-class could be appropriated by Biden and expanded — boosting the standard deduction and the child tax credit in particular. There are many options, and I’m skipping over some technical complications in navigating the parts of the Trump extension that don’t exclusively help the rich. The point is that there is ample room to design a package that re-directs to other taxpayers the vast sums that a simple extension of the Trump law would send to the wealthy.
Some will, of course, raise the question of how to pay for these tax cuts. The Republicans haven’t gone public with a way to pay for extending the Trump tax cuts yet so it’s unclear Biden needs to show a way to pay for his. Nevertheless, with rising concerns over deficits and the punditry likely to raise concerns about re-fueling inflation, and as another basis for distinguishing himself from Trump, he might want to. Fortunately he has many popular proposed tax increases on the wealthy and corporations that could cover this.
Biden has done a lot of great things for the country during his presidency. Most of it, however, has been narrowly targeted or so macro as to be largely invisible. Everyone is happy that there’s an investment in infrastructure but, in any other time, that would have been just routine. People may like semiconductors being manufactured in the United States instead of China, but few talk about that at the dinner table. Addressing climate change is great, but the results are long term and the benefits incremental and, sadly, it’s not a top priority for most voters. We’re all happy that insulin isn’t absurdly expensive anymore — but most of us don’t buy insulin. A middle-class tax cut is something that everyone would see how it benefits them. It would also clearly demonstrate that Joe Biden is more on the side of the vast majority of American voters than Donald J. Trump.
