Now that the fine print is in on President Biden’s ambitious spending plans, it’s worth tempering the hype that this presidency aspires to be transformational with its unapologetic expansion of government—and start anticipating when the inevitable Democratic backlash to the hefty price tag and necessary tax hikes will commence.
To pay for the historic $4.1 trillion in infrastructure and social-welfare spending, Biden is proposing to raise the corporate tax rate, increase the capital-gains and dividend tax rates, and most significantly, lower the income threshold at which Americans can be taxed at the highest rate. While Biden suggested during the campaign that anyone making under $400,000 wouldn’t face any tax hikes, the new proposal would hit a married individual whose household makes over $509,300 (about $255K per individual).
That may sound like a political winner, given that most Americans don’t hit those income levels. Biden’s message in his address to Congress focused on working-class Americans, and took several gratuitous shots at Wall Street and big business. He called his proposals part of a “blue-collar blueprint” that would create millions of jobs for ordinary Americans. It’s a political pitch to cut the Democrats’ massive disadvantage among the white working-class voters who made up the core of the Trump coalition, while hoping there won’t be any consequences on the other side of the socio-economic spectrum.
But the reality is that the evolving Democratic coalition is a lot more reliant on those upper-income earners than ever before—and that real or threatened tax hikes could create a significant political backlash within Biden’s own party. The vast majority of House seats that Democrats flipped in 2018 were concentrated in affluent suburban swing districts, from Orange County, California to Atlanta, that have trended to the left on social issues, but remain centrist on economic issues.
For a taste of how tax-sensitive these voters are, just look at the recent push from blue-state House Democrats representing wealthy districts to reinstate the state-and-local-tax deductions that were rolled back as part of the Trump tax-reform bill. Even leading House Republicans from California, New Jersey, and New York voted against Trump’s 2017 tax plan for fear of the reaction from their affluent voters (and donors). Voters may not reward the party in power for a strong economy, but they’re more likely to punish those in charge for any adverse economic effects.
And for all the spin that these hikes only affect the super-wealthy, the reality is a lot more nuanced. In a wealthy metropolitan area like Washington, the top 4 percent of married households would hit the threshold in which their income taxes would go up. That’s not a massive number, but it’s enough of a constituency to make a difference in competitive House districts. Add expected inflation into the mix, and the number of individuals affected will only increase in the future.
That reality is not lost on potentially vulnerable House Democrats representing higher-income districts. Rep. Carolyn Bourdeaux of Georgia, the only Democrat to win a GOP-held seat in 2020, told The Atlanta Journal-Constitution she was concerned about the price tag of Biden’s proposals. “I’ll be putting on my green eyeshades and sharpening my pencil, looking at the spending,” she said. Three relatively safe Democrats from New Jersey and New York recently threatened to scuttle any deal unless the SALT deductions were restored, in what may be a preview of the pressures to come from lawmakers facing more-difficult reelections.
Remember: Democrats can’t afford to lose more than four votes in the House, and need to keep their more-moderate Senate caucus entirely united to pass any legislation—assuming they can’t secure any Republican support for the big-spending items. That means that Speaker Nancy Pelosi can’t give a free pass to her vulnerable members to vote no.
The fate of Biden’s big spending plans will speak volumes about our future political reality. Many Democratic strategists are convinced that Trump’s taint on the Republican Party has politically crippled the GOP opposition for years. They believe that Trump’s own support for government spending renders any Republican criticism on the economic front to be downright hypocritical. And they’re bullish that the Republicans’ preferred engagement on culture-war issues means that they’ve stopped caring about the low-tax, free-market ideology that dominated the party for generations. Big picture, they expect upper-income suburbanites who defected from the GOP over Trump to remain reliable Democratic voters in the future.
With Trump out of office, the Republican opposition is disorganized, but is also still well-positioned to benefit from the overreach and political hubris that typically plagues a new administration. The Biden administration is no exception to the rule. If Republicans can’t claw back some of the lost suburban vote as a result of Biden’s big-government agenda, they’re truly in for a long drought out of power. But if politics reverts to a new normal in the Biden era, the old tax-and-spend criticism that dogged Democrats for decades could reemerge with a vengeance for next year’s midterms.