Walter Mondale Wasn’t Scared of Raising Taxes. Is Biden?
Walter Mondale, who died Monday at 93, was the last presidential nominee to tell the truth about taxes. This experiment was judged a failure, and no nominee of either party ever attempted it again. We can best honor the former vice president’s memory by acknowledging that Americans send too little of their hard-earned wages to the Internal Revenue Service.Mondale’s profiles-in-courage moment occurred during his speech at the 1984 Democratic National Convention in San Francisco. President Ronald Reagan had eliminated the five highest income tax brackets, dropping the top marginal rate from 70 percent to 50 percent. These tax cuts, combined with Reagan’s Pentagon spending binge, more than doubled the budget deficit, from $74 billion in 1980 to $208 billion in 1983. In that year, the deficit reached nearly 6 percent of gross domestic product, the highest percentage recorded since World War II. We’ve survived much bigger budget deficits since then (including today), but liberals’ prevailing sense of alarm back in 1984 was not misplaced. Reagan’s tax cuts showered money on the rich. Small-government conservatives hoped that increasing the deficit would force cuts in overall federal spending—especially the giant broad-based social insurance programs for the elderly (Social Security, Medicare) that politicians live in fear of cutting. Although this strategy, known as “starve the beast,” didn’t work—federal spending continued to rise—the ballooning deficit gave Reagan sufficient political cover to slash spending on poverty programs, environmental regulation, workplace regulation, health and safety regulation, and so on. A logical start to undoing Reagan’s depredations was to raise taxes, and that’s what Mondale said he’d do in his San Francisco acceptance speech. “Whoever is inaugurated in January, the American people will have to pay Mr. Reagan’s bills,” he said. “Taxes will go up. And anyone who says they won’t is not telling the truth to the American people.… Let’s tell the truth. That must be done—it must be done. Mr. Reagan will raise taxes, and so will I. He won’t tell you. I just did.”It was a moment of terrific bravery. Please note that Mondale didn’t say, “I will raise taxes only on the rich,” as Democrats do today. Instead, he said he would raise taxes on you. When he did so, he pledged, he would—unlike Reagan—make sure that “the corporations and the freeloaders who play the loopholes” would pay their fair share, too. (Incidentally, Mondale was right about Reagan. Just as he predicted, Reagan increased taxes during his second term by about $20 billion.)Presidential candidates no longer say things like what Mondale said in July 1984, in large part because in November of that year Reagan crushed Mondale, winning 49 out of 50 states. Rather than say, “I’m going to raise your taxes,” Democrats say, “I’m going to raise their taxes,” by which they mean people who are so flush that it’s hard to imagine very many of them voting Democratic. That’s when they’re willing to say they’ll raise taxes at all.Thus Mike Dukakis, in 1988, said neither that he would raise taxes nor that he wouldn’t; he just said he didn’t know. Bill Clinton promised a middle-class tax cut in the 1992 primaries and then, as president, increased taxes instead. Al Gore promised tax cuts that were much smaller than the wildly irresponsible tax cuts that George W. Bush promised as a candidate and then, as president, enacted.Candidate Barack Obama set the subsequent pattern for Democrats in 2008: to hedge, basically. He pledged to reverse the Bush tax cuts, but only for people earning $250,000 or more (about $314,000 in today’s dollars). A threshold that high represented a free pass to most households in the top 10 percent of the income distribution. When President Obama finally fulfilled this campaign promise in 2013, he bumped the threshold even higher, to $450,000 (about $518,000 in today’s dollars). Hillary Clinton followed suit in 2016 by proposing a surtax on incomes above $5 million, plus a “Buffett rule” requiring every household earning $1 million or more to pay income tax of at least 30 percent.* And in 2020, candidate Joe Biden promised not to raise taxes on households earning less than $400,000.A $400,000 income means you earn more than 95 percent of all Americans. Does it really serve the cause of social justice to promise this group not to raise its taxes? If anything, that threshold may climb higher. Politico’s Megan Cassella and Brian Faler report that as Biden prepares his tax plan, he has to contend with “Democratic lawmakers from high-cost places like New York City and San Francisco” who think people who earn $400,000 aren’t rich. The truth is that being able to raise a family in haut bourgeois comfort in New York City or San Francisco is a pretty serviceable definition of “rich.” Biden also pledged during the campaign to cancel Donald Trump’s 2017 tax cut, which dropped the corporate tax from 35 percent to 21 percent. But Biden’s tax plan raises the rate only to 28 percent, and he may drop that still further, to 25 percent, to appease the business lobby, which, having split with the GOP over voting rights, is looking these days to Democrats like less of a they and more of a you.Pretty much all Americans are taxed at levels that are low compared to other advanced industrial democracies, and even compared to the United States during the twentieth century.Total tax revenue in the U.S. is 24 percent of GDP, compared to 34 percent for other members of the Organization for Economic Cooperation and Development. The average federal income tax rate paid by a U.S. family of four climbed from not quite 6 percent in 1955 to a peak of about 12 percent in 1981. After that, it fell back to 1950s levels. Taxes were, of course, much more progressive in the 1950s, with a top marginal rate of 92 percent, compared to 37 percent today.For lower-income people, today’s lighter tax burden—attributable mainly to the Clinton and Obama presidencies—constitutes progress. As Mitt Romney famously pointed out, nearly half of all households pay no income tax at all. What he failed to grasp was that that’s good, not bad, because these households can’t afford to pay the tax. For the rich, the lighter income tax burden—attributable mainly to the Reagan and George W. Bush presidencies—is a problem. The wealthy aren’t paying their fair share.As for the middle class, whether it’s good or bad that taxes are historically low is hard to say. It depends a lot on how you define “middle class,” and where you’re situated within it. But a reasonably safe generalization is that anybody who dwells within the professional class (with a very few exceptions, like public schoolteachers) is probably paying too little in taxes. That’s true even though the professional class tends to vote Democratic.Tax breaks for this cohort are legion. Wage earners don’t have to pay payroll tax on income above about $138,000; the threshold shouldn’t exist at all, but if it has to exist, it should be much higher. The mortgage interest deduction can be claimed on mortgage debt all the way to $750,000, which is more than twice the median house price in the U.S.; the deduction should be eliminated, but if it isn’t, the threshold should come way down. Nobody pays inheritance tax on less than $11.7 million—that’s just insane. The top marginal tax rate of 37 percent should kick in at perhaps half the current $622,000, and additional rates should be layered above that, climbing to a top marginal rate of 70 percent. You get the idea. The people who pay too little in taxes aren’t limited to some black-hatted other. They also include people very much like you, dear reader. Alas, Walter Mondale is no longer around to tell you to pay up. Requiescat in pace. * A previous version of this article incorrectly defined who would be subject to Hillary Clinton’s proposed “Buffett rule.”
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