Jim Tankersley

WASHINGTON — Three years after President Donald Trump rode a wave of populist anger into office, some of his top Democratic challengers are calling for a fundamental reordering of U.S. capitalism, arguing that voters will embrace bold plans to reverse decades of rising inequality by raising taxes on corporations and the rich.

The $20.5 trillion proposal for “Medicare for All” released by Sen. Elizabeth Warren of Massachusetts on Friday is the most prominent example of how a party that once bet on centrist economic policies to win elections is moving toward far more ambitious efforts to redistribute wealth and expand the government’s role in the economy.

In doing so, Democrats are trying to push the boundaries of how much a country can rely on a sliver of high-end investors and other wealthy citizens to fund widely used social programs and bankroll other services traditionally paid for by individuals.

Warren, who is leading in polls, has proposed a wealth tax on billionaires, along with new taxes on corporations and financial transactions like selling or buying stocks. Sen. Bernie Sanders of Vermont has embraced raising taxes on billionaires and corporations, as well as on the middle class, to fund universal health care, free college, clean energy and other government programs. Another Democrat who is climbing in the polls, Pete Buttigieg, would reverse Trump’s corporate tax cuts to pay for a less expansive and expensive health plan and has also expressed support for higher taxes on the rich.

Liberal champions of these proposed shifts say they would restore economic fairness and security to millions of Americans who have fallen behind as the economy tilted in recent decades to favor the very rich. Conservative critics say they would cripple business investment, slow economic growth and dissuade future entrepreneurs.

While those objections may have held sway in the past, support for economic programs that redistribute wealth has grown along with voters’ increased anger toward big business and a sense that companies and the rich should pay a larger share of taxes. The top 1% of Americans held 29% of the nation’s wealth in 2016, according to the Federal Reserve, more than the combined wealth of the entire American middle class.

The proposals are a sharp departure from the recent past, both for Democrats and for the terms of political debate in a nation that for several decades rewarded candidates who promised to reduce taxes and scale back government’s role in the economy. While Democratic candidates often tiptoed around tax increases on banks or the rich, both Warren and Sanders have made tax increases a centerpiece of their campaigns.

Warren’s Medicare for all plan by itself includes $20.5 trillion in new government spending over a decade. The plans include direct repudiations of some policy initiatives of President Barack Obama, who sought to reduce corporate tax rates to bolster competitiveness for U.S. businesses, and whose health plan tried to enhance, rather than replace, the existing private health industry.

Supporters say the candidates are reacting to voter frustration over sluggish wage growth and spiking costs across working families’ lives, including housing, child care, schools and health care, along with concerns about inaction toward climate change.

“I think people don’t care as much about taxes as they care about how their life is going,” said Betsey Stevenson, a University of Michigan economist who helped develop a list of possible tax increases and spending cuts that Warren drew on to fund her health care proposal.

“Our climate problems have only gotten worse,” she said. “Corporate greed has only gotten worse. We’ve continued to see the gains go disproportionately to the top. And we’ve continued to see the bottom 90% — it’s just not all working for them.”

Those concerns have been exacerbated by Trump’s economic policies, including a $1.5 trillion tax cut, which delivered its biggest gains to corporations and wealthy Americans, and has yet to produce the sustained investment boost and accelerated wage gains for middle-class workers that the administration promised.

In the decadelong recovery from the Great Recession, real incomes for the top 1% of U.S. households have risen 38.5%, according to research by economist Emmanuel Saez at the University of California, Berkeley. Incomes for the bottom 99% grew 10% over that same time frame.

Still, not every Democrat is embracing the type of aggressive redistribution that Warren and Sanders propose. Former Vice President Joe Biden wants to reverse Trump’s tax cuts for corporations and the “super wealthy” and raise taxes on investment gains for multimillionaires. But he has criticized Medicare for all, proposing instead to expand Obama’s Affordable Care Act, in part by giving Americans the option to buy into a government health plan — all funded by increased tax rates on capital gains.

Representatives for Biden said Friday it was not possible for Warren to pay for her plan without raising middle-class taxes, a criticism she brushed off while speaking to reporters in Des Moines.

“If anyone wants to defend keeping those high profits for insurance companies and those high profits for drug companies, and not making the top 1% pay a fair share in taxes and not making corporations pay a fair share in taxes,” she said, “then I think they’re running in the wrong presidential primary.”

But conservative economists who have long argued that tax cuts are the best fuel for economic growth and rising wages said Friday that Warren’s planned tax increases on corporations would rebound to hurt the middle class — along with everyone else.

“This would be pretty dramatic,” said Nicole Kaeding, an economist who is the vice president for policy promotion at the National Taxpayers Union Foundation, a Washington nonprofit that promotes lower taxes.

“Capital drives the U.S. economy,” she said. “Investment increases productivity, it creates jobs, it raises living standards and wages. Slowing or handicapping investment would negatively affect everyone in the United States.”

Warren's plan would move the costs of the entire U.S. health care system, which she pegs at just under $52 trillion over the next decade, onto the books of the federal government. She says that would reduce overall health spending and spare Americans the financial burden of paying directly for care.

To cover those costs, Warren would impose a new tax on financial transactions, like buying and selling stocks and bonds. She would also tax profits from investments that increase in value on an annual basis — like shares in Google or Apple — not just when the assets are sold. She would raise taxes on U.S. companies that book profits overseas.

Warren would also increase her wealth tax on billionaires to 6% of the value of all their assets above $1 billion, up from her previous proposal of 3%. And she would assess a tax on corporations that roughly equates to what they currently pay for employees’ health care, with a slight savings.

Warren says none of those tax increases would hit the middle class. Republicans mocked that claim.

“Hahaha,” Sen. Ben Sasse of Nebraska said in a statement. “This make-believe math is bonkers.”

Many analysts, including some Democratic economists, say it is unclear if Warren’s combination of new taxes — including some never tried at this scale in the United States — can raise anywhere close to the revenue she estimates.

Perhaps the biggest unknown is how the capitalist U.S. economy would function with levels of taxation and spending more comparable to the social democracies of Scandinavia.

“It’s as much an art as a science, trying to figure out the economic effects of policies we haven’t seen before,” said Diane Lim, a former economist for congressional Democrats and senior economist at the White House Council of Economic Advisers, who now works for the Penn Wharton Budget Model. “I’m worried it’s unrealistic. It’s just unknown.”

Polls suggest a wide range of Americans support raising taxes on the rich, and in particular a tax on the very wealthy. They also show increased numbers of Americans saying the government should do more to help them. Those trends, in addition to the concentration of wealth at the very top, are helping to drive Democrats toward more efforts to tax the rich and redistribute through the government, said Gene Sperling, a National Economic Council director under Obama.

“The expansion of economic concentration and wealth inequality has put a greater focus on the top one-tenth of 1%,” Sperling said, “both because of the obscene economic inequality it signifies and as a practical matter, there is just more revenue to capture there than 30 years ago.”

Sanders has said explicitly that he hopes the days of the American billionaire are numbered.

“What we are trying to do is demand and implement a policy which significantly reduces income and wealth inequality in America by telling the wealthiest families in this country they cannot have so much wealth,” he said in an interview in September.

For all its detail, Warren’s funding proposal leaves a lot of questions unanswered. Many of them relate to how the new batch of taxes she proposed Friday would interact with the nearly $10 trillion in tax increases she has already proposed for corporations, high earners and the wealthy.

Kaeding of the National Taxpayers Union Foundation said she worried that with Warren’s latest batch of tax increases, some investments could end up with an effective tax rate of more than 100% — meaning that investors would have to pay the government their entire gains on investment, and then some. She noted that the combined corporate tax increases would give the United States the highest effective corporate tax rate in the world among wealthy nations. Both would hurt growth, she said.

Liberal economists sometimes share those concerns, to a lesser degree. Mark Zandi, the chief economist at Moody’s Analytics, who also helped develop Warren’s list of tax increases to fund Medicare for All, said that raising taxes on businesses and the rich would hinder growth, but not as much as raising taxes on the poor and middle class would. He also said economists would need to model the effects of increased government spending on health care and potential cost savings to consumers.

“There will be, all else being equal, negative effects for sure” from the tax increases, Zandi said. “But there’s also the benefit of where that money is going. Where that shakes out, we will have to see.”

This article originally appeared in

Plan With Many Zeros Cements Democrats' Bet on Taxing Rich

(News Analysis)

But whether the tax incentive actually saved the sawmill is unclear. Publicly available evidence does not substantiate the claim, and White House officials did not provide information Tuesday that would substantiate it. While the White House highlighted James in a news release before the speech, Trump never mentioned him — or the provision that the White House claims saved his job.

James’ invitation was intended to call attention to a once-obscure portion of the $1.5 trillion tax overhaul, known as opportunity zones, meant to drive investment to parts of the United States that continue to struggle economically. The 2017 law offered potentially lucrative reductions in capital gains tax bills for investors who put money into projects inside certain areas that state officials designate as opportunity zones.

James worked for 26 years at what used to be called the Anderson-Tully hardwood sawmill. Vicksburg Forest Products bought the mill last year and laid off all 158 workers. It then began refitting the mill to accommodate a different type of lumber and eventually rehired some workers. The plant now employs 125 people.

It is possible that the mill could have been closed by its previous owners if it had not been sold, costing all 158 workers their jobs, rather than a smaller number. But Anderson-Tully officials had not previously indicated to the state that they planned to close the plant, though state records indicate that Anderson-Tully had been seeking for months to sell a tract of land it owned nearby. Local officials were surprised by the news of its sale and pending layoffs, The Vicksburg Post reported in March.

A representative for Vicksburg Forest Products said late Tuesday that the tax provision was a “key reason” it invested in the sawmill.

But at the time the company agreed to buy the mill, there were no guarantees the property would qualify for the new federal incentives.

The planned sale of the mill was announced in March, several days before the state of Mississippi proposed designating the area as an opportunity zone. The Treasury Department did not approve that designation until April.

The new owners have been praised by state and federal officials for their investment — but throughout the sale announcements, in March, May and June, no one appears to have publicly mentioned the Trump tax cut provision. News reports did not begin to cite opportunity zones as a factor in the mill investment until December, when a Trump administration official visited Vicksburg to promote the project.

Vicksburg Forest Products is managed by Billy Van Devender — a wealthy timber baron and philanthropist who donated $2,700 to Trump’s 2016 presidential campaign.

An email to him Tuesday was returned by his son, William Van Devender Jr. He wrote Tuesday evening that “the designation of Vicksburg as an Opportunity Zone was one of the key reasons Vicksburg Forest Products bought, reopened, and invested in the former Anderson-Tully sawmill.”

“Last April, Vicksburg was designated an opportunity zone,” he added. “Our company purchased the mill the following month, knowing about the economic advantages an opportunity zone offered. In June, we announced we were reopening the mill and planned to hire 125 employees.”

Van Devender did not respond to a follow-up question about whether the company had advance knowledge of the state’s pending opportunity zone designation in March, when it first agreed to buy the mill. He also did not directly address the question of how the investment “saved” jobs when the company actually reduced employment at the mill.

The circumstances surrounding the sawmill’s ability to claim the tax incentive highlight critics’ fear that the opportunity zone incentives could end up rewarding economic development that would have occurred anyway — while providing rich investors with tax breaks.

“The best-case scenario is they’ve given a huge capital gains tax break to continue a sawmill,” said Seth Hanlon, a former economic policy adviser to President Barack Obama who is now a senior fellow at the liberal Center for American Progress in Washington, “but with fewer employees.”

A spokesman for Gov. Phil Bryant of Mississippi said in an email: “Gov. Bryant chose these 100 tracts around the State of Mississippi to encourage the exact type of investment that has been seen with the Vicksburg Forest Products sawmill. This is an American success story where more than 100 Mississippians now have jobs thanks to the creation of opportunity zones. We hope this type of investment will continue in other opportunity zone tracts throughout the state.”

The White House, in announcing Trump’s guests, said James had worked at the sawmill for 26 years when he was told that it would close.

“Thankfully, last year, Vicksburg was designated an opportunity zone through provisions in the Tax Cuts and Jobs Act,” the White House wrote. “The plant soon reopened and Roy was hired to oversee the entire facility.”

Ben Carson, the Housing and Urban Development secretary whom Trump has appointed to lead an administration task force on opportunity zones, went further at an appearance in Vicksburg in December.

Carson said the mill was “just an incredible sight here,” The Vicksburg Post reported, “because this is one of the first places to actually take advantage of the opportunity zones and opportunity funds. Had it not been for that program, it would very likely that this place would have closed down and those jobs gone away.”

Trump did not refer to opportunity zones in his speech Tuesday. He only briefly mentioned the tax law, as part of a section boasting about the strength of the economy.

“Companies are coming back to our country in large numbers,” he said, “thanks to our historic reductions in taxes and regulations.”

This article originally appeared in <a href="https://www.nytimes.com/2019/02/06/us/politics/opportunity-zone-tax-provision.html" id="b478cba2-47d3-3d7a-a4ac-8ec66029d330">The New York Times</a>.

Among the guests President Donald Trump invited to the State of the Union on Tuesday was Roy James, plant manager of a sawmill in Vicksburg, Mississippi, whose appearance was intended to highlight a tax provision the White House credits with saving James’ job.

Did Trump's Tax Break Save a Sawmill?

Politics

Local

Metro

World

News 

Celebrities

Music

Movies

Entertainment

Fashion

Beauty & Health

Relationships & Weddings

Food & Travel

Lifestyle

Domestic

International 

Business

About

Highlights

Selection Criteria

Jury

Terms And Conditions

FAQs

Pulse Influencer Awards

Sports 

Celebrity Picks

Pulse Picks

Courses

Careers

Pulse Marketing

Explore categories

Pulse Nigeria is the most followed news and entertainment platform, informing and engaging young Nigerians round the clock, providing updates by the hour.

Jim Tankersley

Articles written by the author

Plan With Many Zeros Cements Democrats' Bet on Taxing Rich

Did Trump's Tax Break Save a Sawmill?