Rising Democratic fortunes in the Senate are raising the odds of a tax hike.
Democratic presidential nominee Joe Biden’s tax plan includes increasing the corporate tax rate from 21% to 28% and returning the top individual tax rate to 39.6% from 37%.
Biden’s plan would also tax investments, which currently have a preferential rate, at the much higher income tax rate for those making more than $1 million a year.
The former vice president’s tax plan would increase taxes by more than $3 trillion over the next 10 years and kill more than 500,000 jobs, according to the Tax Foundation, an independent tax policy think tank.
However, getting these tax increases enacted relies on support from the House and Senate.
Democrats control the House and are expected to maintain that power after the election. The Senate, on the other hand, is under Republican control, but that is increasingly likely to change. Democratic challengers have been running ahead of incumbent Republicans in key states, including Colorado, Arizona, North Carolina, and Maine, and are now threatening GOP senators in traditionally red states.
“Over the past year … Democrats have expanded the map to create paths to larger majorities than just the bare 50-50 or 51-49,” said Jacob Rubashkin, a reporter and analyst at Inside Elections, a nonpartisan newsletter that analyzes elections. There are now eight Republican senators in competitive races, he said. Democrats need to flip only three seats, on net, to take the majority. Democrats are running strong and presenting challenges in Iowa, Montana, Georgia, and South Carolina.
There are also Republican-held seats that may be less vulnerable to Democratic wins but are still exposed.
“The fact that we’re talking seriously about flipping seats in Kansas and Alaska would have sounded not insane but really unlikely a year ago, but that’s where we are today,” Rubashkin said.
With just a simple majority, Democrats could enact sweeping tax changes despite the filibuster.
Senate rules provide workaround through which taxes can be increased or decreased by a simple majority of support from both chambers, a legislative process known as “budget reconciliation.” Although the tool cannot be used for all policy purposes, it could be used to enact tax changes favored by Biden and Democrats.
Biden has repeatedly vowed to raise taxes on “Day One” of his administration. The Biden campaign did not respond to a request for further information about his plans.
Mark Mazur, executive director of the Tax Policy Center and former assistant secretary for tax policy at the Treasury Department under the Obama administration, said that Biden would likely try to determine if the economy is recovering from the pandemic before pursuing tax increases.
“Assuming there is a Biden administration, on Jan. 21, they’re going to take stock of the situation they have, and if there’s an ongoing pandemic and the economy is in the doldrums, it’s going to be really hard to believe that tax increases are at the top of the to-do list,” he said.
Mazur said that the Obama administration’s top priority was healthcare, but it focused first on providing aid during the Great Recession. He said he expects a Biden administration would do the same.
“You’d expect them to juggle priorities,” Mazur said.
