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HOW HARRIS CAN OUTFOX TRUMP (AND VANCE) ON TAXES  
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Bill Scher
August 1, 2024
Washington Monthly
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_ The presumptive Democratic nominee can appeal to the working class
by slapping a higher tax rate on corporations that lavish money on
their chief executives but don’t adequately pay their workers. _

The New New Deal: How the veeps can use the tax code to woo voters.
Here, Vice President Kamala Harris speaks during a campaign rally in
Atlanta on July 30, 2024., Lawrence Cooper/Sipa USA via AP Images

 

Mounting a presidential campaign in 100 days comes with a myriad of
challenges, one of which is developing a distinctive policy agenda.
And for Democrats, developing a tax policy is inherently fraught.

As members of a party that takes governing seriously, Democrats
can’t echo Republicans and blithely promise tax giveaways. They are
on relatively safer political ground when targeting tax increase
proposals on the wealthy and corporations. But they still try to avoid
being tarred as harmful to business—especially small business—and,
in turn, harmful to the overall economy.

For example, in the 2017 Tax Cuts and Jobs Act,
[[link removed]] Donald
Trump cut the corporate tax rate from 35 to 21 percent. Democrats are
eager to repeal some of the law. But for Joe Biden, during the 2020
campaign, going back to 35 percent was too much for him. Instead, he
proposed an increase to 28 percent, with a 15 percent minimum for
businesses earning profits of $100 million or more. Once in office,
after the knock-down, drag-out negotiations with Senator Joe Manchin,
which produced the 2022 Inflation Reduction Act, Biden was forced to
leave the corporate tax rate at 21 percent. He did win a 15 percent
minimum, but only on billion-dollar businesses.

Deciding how to reform the tax code now has more urgency because most
tax provisions in the Tax Cuts and Jobs Act expire in 2025. What to
keep, what to modify, and what to let expire will be some of the first
decisions the next president will have to make.

Most of what expires involves tax cuts for individuals, estates, and
businesses not subject to the corporate tax rate.

What doesn’t expire is the 21 percent corporate tax rate. Paul Ryan
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who shepherded the bill as Speaker of the House in 2017, explained
several years later that “we made temporary what we thought could
get extended. We made permanent what we thought might not get extended
that we wanted to stay permanent.”

However, if Kamala Harris leads Democrats to a trifecta—winning the
White House, House, and Senate—then raising the corporate tax rate
through the filibuster-proof budget reconciliation process becomes
plausible. Granted, this is what Biden hoped to do with budget
reconciliation in 2022, but Manchin and Senator Kyrsten Sinema,
another at-the-time Democrat sensitive to the concerns of
corporations, complicated his plans.

Neither will be in the Senate come 2025, which may make things easier
for a President Harris. Or not. Legislating is always harder than it
looks. Other senators could still get squeamish over how any
particular tax policy could impact the economy.

Harris, like Biden, has already said that she won’t raise taxes on
individual annual income under $400,000, effectively embracing an
extension of a large component of Trump’s tax law. What she will
propose regarding corporation taxation is still unknown. (Trump has
proposed cutting the corporate tax rate again, down to 15 percent.)

One idea Harris should consider embracing, both to impress
working-class voters on the campaign trail this year and to help
navigate the legislative thicket next year: is to raise the corporate
tax rate only on corporations that pay their chief executives absurdly
more than they pay their workers.

In 2021, writing for the _Washington Monthly_, Carter Dougherty urged
Biden
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adopt a version of a policy that originated in Portland, Oregon:
Companies that pay CEOs 100 times more than their median worker must
cough up a 10 percent tax surcharge. If the ratio is 250-to-1, then
the surcharge is 25 percent. In 2023, also in the _Monthly_, Jessica
Church argued such a law could have rendered the protracted United
Auto Workers strike unnecessary.
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The appeal of the approach is clear. CEO compensation has skyrocketed
in the last few decades, fueled by financial instruments like stock
options, while worker compensation has lagged. This is a way to help
increase the pay packages of average Americans without complex
government bureaucracy or contentious labor strikes. As a Portland
City Council member told Dougherty, “The goal was not to make money.
The goal is to get employers to raise median wages.”

Trump has been trying to build on his longstanding support among the
white working class by making inroads with African-American and Latino
workers and rebranding the GOP as a working-class party, despite his
continued deference to corporations on taxes and regulation, his
inability as president to support manufacturing, his disinterest in
raising wages, and his dislike of policies that would benefit union
organizing. In addition to prosecuting the case against Trump, Harris
could use a signature policy—one not adopted by Biden—which shows
she is serious about not just competing for working-class votes but
ready to deliver for the working class with smart policies.

Federal legislation inspired by Portland has been introduced in the
last several sessions of Congress but has not gained traction. The
Tax Excessive CEO Pay Act of 2024,
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most recent version, has several tiers of tax penalties, with
companies offering CEO compensation at 50-to-100 times the median
worker receiving a 0.5 surcharge, and those at 500 times the median
worker faced with a 5 percent surcharge.

However, the bill only has 15 sponsors in the House
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in the Senate.
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lack of interest from most members of Congress probably stems from the
aggressive specifics. As the sponsors note, citing data from the
Economic Policy Institute, “In 2022, big company CEOs were paid 344
times
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much as a typical worker, up from an average pay ratio of just 21 to 1
in 1965.” This highlights how absurd the pay gap has become and the
difficulty of returning to the past. There’s no way corporations
will suddenly slash the CEO-to-worker compensation ratio by 85 percent
to avoid a tax surcharge.

As Harris considers what to keep and what to change in the Tax Cuts
and Jobs Act, she can embrace the concept of tying corporate tax
treatment to worker pay without wedding herself to the specifics of
the Tax Excessive CEO Pay Act. Instead of surcharges, she can propose
keeping the 21 percent corporate tax rate for companies with a
relatively reasonable CEO-to-work pay ratio (lower than 344-to-1 but
probably higher than 50-to-1) while hiking it to 28 percent for the
rest. Or she can sweeten the deal by offering Trump’s new level of
15 percent for the best-paid workers.

If she determines using the corporate tax rate to improve worker pay
is too blunt an interest, she could consider the cudgel of the new
stock buyback tax. Stock buybacks are when companies buy back their
stock to distribute profits to investors, but as the Tax Policy
Center
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“stock buybacks allow foreign investors to avoid US taxation.” In
the Inflation Reduction Act, Biden got a new excise tax of one percent
slapped on stock buybacks. And in his 2023 State of the Union address,
Biden proposed, “We quadruple the tax on corporate stock buybacks to
encourage long-term investments instead.” Harris could institute a
higher tax only on companies with poor pay practices.

Harris can even borrow some of the rhetoric from Trump’s running
mate, Senator J. D. Vance. “Let’s tax the things that are bad and
not tax the things that are good,” he infamously said on a
right-wing podcast, arguing for higher tax rates on people who don’t
reproduce.

Harris can say, “I agree we should tax things that are bad and not
tax the things that are good. But I believe the thing that is bad is
not people who don’t choose to go into labor, but corporations who
don’t adequately compensate people for their labor.”

_BILL SCHER is the politics editor of the Washington Monthly. He is
the host of the history podcast When America Worked and the cohost of
the bipartisan online show and podcast The DMZ. Follow Bill on X
@BillScher._

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* Corporate taxes
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* low wages
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* CEO Pay
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