One top Democrat is responding to his party’s minority status with an aggressive plan to transfer income to the middle class.
Rep. Chris Van Hollen, the ranking Democrat on the Budget Committee, laid out the principles of his plan to cut taxes for middle class families while taxing the wealthy and financial firms Monday in an address at the Center for American Progress Action Fund, an advocacy group aligned with Democrats and the Obama administration.
The Maryland Democrat’s plan comes as the Obama administration and Congress prepare their annual budgets.
Although he approves of Democrats’ recent budget plans, “in order to tackle that decades old problem of chronic stagnant wages and flat incomes for most Americans, we need to go further,” Van Hollen said.
The plan would transfer over $1.2 trillion to the middle class over the course of 10 years, according to the Maryland congressman, by raising taxes on high earners and imposing a new tax on financial transactions.
With his party in the minority in both chambers of Congress, Van Hollen’s ability to shape taxing and spending will be limited. Nevertheless, his speech was calibrated toward shaping Democrats’ pitch to middle class voters. “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.
The critical features of Van Hollen’s plan would be increased tax credits for working families. In particular, working couples earning less than $200,000 combined would receive a “paycheck bonus tax credit” of $2000.
Van Hollen would also introduce a new tax credit for workers who put earnings into tax-preferred savings accounts and an enlarged tax credit for child care.
Altogether, 150 million Americans would see their tax bill go down, according to Van Hollen, who claimed that those benefits would not add to the deficit. Instead, they would be financed by curbing the tax credits and deductions claimed by those in the top 1 percent of income earners and by imposed a 0.1 percent fee on stock trades.
Van Hollen said that the financial transaction tax would be “virtually imperceptible” to most investors, but would dampen what he described as unproductive computerized high-frequency trading. He likened the tax to one already in place in the United Kingdom.
The congressman acknowledged that his plan was not likely to be embraced by Republicans, who criticized early reports of its provisions. Nevertheless, he said that he would be introducing specific measures as standalone legislation, while pushing the broader package on a longer time frame.
One such policy would aim to keep workers’ incomes from falling behind rising CEO pay by limiting tax deductions for bonuses to executives at public companies if those companies’ workers did not also receive raises to keep their pay increasing with the cost of living and productivity. That bill is coming in a matter of days, Van Hollen said.
The Republican budget, he claimed, would impose $2,000 in new liabilities on a two-earner family making $80,000 paying for child care. His plan, which has not been laid out in detail or assessed by outside analysts, would cut that family’s tax burden by $4,400.
Van Hollen said that action along the lines of his recommendation was necessary because Democrats to this point have not fully grappled with the policy changes needed to reverse the economic forces squeezing middle class families.
“I don’t think they address it with the full force that is necessary” to reverse multi-decade trends of income stagnation, Van Hollen said of the Democrats’ current budget plans.
This article was originally posted at 11:17 a.m. and has been updated.
