First Salvo From Democrats: A Middle-Class Tax Cut

Van Hollen unveils plan to make tax code more progressive in opening stage of economic message fight.

House Budget Committee ranking member Chris Van Hollen, D-Md., at the Democratic National Convention in Charlotte, N.C.
National Journal
Jan. 12, 2015, 4:52 a.m.

Demo­crats’ pop­u­list eco­nom­ic mes­saging took clear­er shape Monday, as Rep. Chris Van Hol­len un­veiled a plan de­tail­ing middle-class tax breaks—and im­pos­ing a great­er bur­den on the wealthy.

Van Hol­len’s plan is the party’s first high-pro­file at­tempt to put de­tails be­hind an eco­nom­ic agenda fo­cused on in­come in­equal­ity that many say Demo­crats failed to out­line dur­ing the 2014 elec­tions. It’s also an ef­fort to draw con­trasts with the am­bi­tious tax plan be­ing craf­ted by Ways and Means Com­mit­tee Chair­man Paul Ry­an—one that ac­tu­ally stands a chance of gain­ing trac­tion in the GOP-con­trolled Con­gress.

With a his­tor­ic­ally small minor­ity in a cham­ber that strongly fa­vors the ma­jor­ity, House Demo­crats will have pre­cious few open­ings to ac­tu­ally in­flu­ence le­gis­la­tion—or at least draw at­ten­tion to their ideas—in the 114th Con­gress. Their goal is to seize those chances when they have them.

“The up­com­ing budget de­bate will give the Amer­ic­an people an op­por­tun­ity to hear very dif­fer­ent ap­proaches to this chal­lenge,” Van Hol­len said. “I look for­ward to this de­bate.”

Van Hol­len, the rank­ing mem­ber on the House Budget Com­mit­tee, out­lined his plan Monday at the Cen­ter for Amer­ic­an Pro­gress, re­peatedly cri­ti­ciz­ing a sys­tem that he be­lieves be­ne­fits those who play the stock mar­ket rather than work for a paycheck. His plan is head­lined by a $1,000 cut for tax­pay­ers mak­ing less than six fig­ures, off­set by in­creased levies on Wall Street traders and high-earn­ing CEOs.

“What our coun­try needs is a grow­ing eco­nomy that works for all Amer­ic­ans, not just the wealthy few,” he said. “Surely we can change the tax code to in­centiv­ize cor­por­a­tions to give em­ploy­ees big­ger paychecks and re­ward people who earn money through hard work.”

That’s the sort of mes­saging that has made Sen. Eliza­beth War­ren a rock star in lib­er­al circles, and a vis­ion some Demo­crats say they need to tout if they are to be suc­cess­ful in fu­ture elec­tions. Van Hol­len’s plan is con­gres­sion­al Demo­crats’ first at­tempt since the elec­tions at in­cor­por­at­ing those ideals in­to a le­gis­lat­ive plan. House Minor­ity Lead­er Nancy Pelosi en­dorsed the idea, ac­cord­ing to The Wash­ing­ton Post, call­ing it “new and fresh.” Van Hol­len said he shared the plan with the White House, but did not elab­or­ate on the ad­min­is­tra­tion’s re­sponse.

Re­pub­lic­ans were quick to dis­miss the pro­pos­al.

“Just as the sun rises in the east, Wash­ing­ton Demo­crats pro­pose an­oth­er massive tax in­crease,” said Ways and Means GOP spokes­man Brendan Buck. “Here in the House, our fo­cus is go­ing to be on clean­ing up the tax code so that we can lower rates for all tax­pay­ers and help cre­ate good-pay­ing jobs, not scar­ing them off with pun­it­ive tax hikes.”

And Van Hol­len’s op­pos­ite num­ber on the Budget Com­mit­tee, Chair­man Tom Price, said in a state­ment that “Wash­ing­ton shouldn’t be in the busi­ness of pick­ing win­ners and losers in the eco­nomy.”

In ad­di­tion to the in­come-tax break, Van Hol­len’s plan would also provide ex­tra child-care cred­its and in­centiv­ize sav­ing money. It would re­coup that rev­en­ue by elim­in­at­ing tax de­duc­tions on CEO pay over $1 mil­lion and im­pos­ing fees on some mar­ket trans­ac­tions. The plan also elim­in­ates some de­duc­tions for com­pan­ies that lay off em­ploy­ees or keep work­er pay stag­nant, while prod­ding com­pan­ies to of­fer stock op­tions and in­cent­ive pay to all em­ploy­ees.

“We must en­sure that all Amer­ic­ans who work hard and play by the rules are re­war­ded with a fair share of a grow­ing eco­nom­ic pie,” Van Hol­len said, em­phas­iz­ing the coun­try’s stag­nant wages des­pite re­bound­ing job growth. “There’s a dis­con­nect between the value work­ers are cre­at­ing and the value they’re tak­ing home.”

While the middle class is strug­gling, he said, Re­pub­lic­ans are more con­cerned with help­ing the rich. He poin­ted to a tax plan pos­ited by House Re­pub­lic­ans last year, which would have dropped the top in­come-tax rate from 39.6 per­cent to 25 per­cent. After the event, Van Hol­len said he’s skep­tic­al that many—or any—Re­pub­lic­ans will be sup­port­ive of his pro­pos­al. “As of today, Re­pub­lic­ans are still very wed­ded to their trickle-down the­ory,” he said. “They just ig­nore all the evid­ence that’s star­ing them in the face. We’ll find out. I would wel­come any sup­port.”

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