Warren turns on Democrats in tax fight
Sen. Elizabeth Warren (D-Mass.) criticized fellow Democrats on Monday for kowtowing to past Republican tax cuts in an effort to broaden out the tax policy debate as it heats up ahead of the election.
“Look at the Bush tax cuts. Why did those cuts cost $8 trillion? Because his Democratic successor, President Obama, cut a deal with Republicans to make nearly all of Bush’s temporary cuts permanent,” Warren said Monday.
She also blasted a tax deal that sailed through the House earlier this year with wide bipartisan support, but that has stalled in the Senate amid Republican opposition.
That $78 billion proposal, engineered by top Senate tax-writer Sen. Ron Wyden (D-Ore.) along with House Ways and Means Committee Chair Jason Smith (R-Mo.), was already losing momentum in Congress ahead of the larger fight over Trump-era tax cuts. Warren’s Monday comments further erode its viability.
“[Republicans] tanked the deal because they believe they can get even more next year, and Democrats won’t have the spine to stop them,” Warren said.
Warren’s criticism of Democrats’ amenability to Republican tax cuts is part of a wider effort happening within both parties now on how to frame the debate on tax changes because major parts of the Trump tax cuts are set to expire at the end of next year.
Presumptive Republican nominee former President Trump told business executives last week he wanted to drop the corporate tax rate to 20 percent from 21 percent, the rate that his 2017 tax reform pulled down from 35 percent.
Other Republican tax writers have signaled they may be interested in going lower on the corporate tax rate, as well, including Ways and Means Committee Vice Chair Vern Buchanan (R-Fla.).
Buchanan said in May that top priorities for Republicans include extending a 20-percent deduction for partnerships, S-corporations and LLCs.
“That’s got to get addressed some way, one way or the other,” he said.
He described bonus depreciation, which allows companies to deduct equipment costs up front as opposed to over time and is one of the provisions in the stalled Senate tax deal, as “really important.”
But similar to Warren’s tug to the left, conservative groups are also pulling further rightward.
The Cato Institute, a libertarian think tank, put out a tax plan Monday that would cut the corporate tax rate to 12 percent, drop the top marginal tax rate to 25 percent from 37 percent, cut the capital gains and dividends tax rate to 15 percent, and cancel the estate tax.
It’s unclear whether Democrats will heed Warren’s criticism that tax policy over previous presidential administrations has taken two steps right for every one left.
While the Biden administration has pledged not to raise taxes on anyone making less than $400,000 per year and has also beefed up the IRS to retrieve more funds from high earners, the administration has left in place much of the legislative revenue architecture of the Trump tax cuts.
On the corporate tax rate, for example, the administration has sought not to reverse it fully to 35 percent but only partially to 28 percent.
However, concerns about the state of the deficit, which ballooned after the economic emergency measures delivered in response to the pandemic and exacerbated a budgetary fight last year, may be weighing on some lawmakers’ minds.