The Democratic debate barely touches tax issues.
It was the Democrats' turn to talk about the issues at their first debate in Las Vegas last evening. The debate was run by CNN, with moderator Anderson Cooper supplying the questions. The debate participants included Martin O'Malley, Bernie Sanders, Hillary Clinton, Jim Webb and Lincoln Chafee.
Unlike the Republicans, the Democrats did not offer any substantial tax reform policies other than to share their views on "tax fairness." It is safe to say that the current progressive tax system would maintain its current form no matter which Democrat is elected--with some tweaks, of course.
Bernie Sanders, one of the front-runners, wants to lower the estate value threshold where higher tax rates kick in for estates. He stated, "Millions of Americans are working longer hours for lower wages, and yet almost all of the new income and wealth being created is going to the top one percent." Mr. Sanders wants to increase capital gains and dividends tax rates.
What he plans to do with this tax revenue is summed up in the following response to a debate. "In my view, what we need to do is create millions of jobs by rebuilding our crumbling infrastructure; raise the minimum wage to $15 an hour; pay equity for women workers; and our disastrous trade policies, which have cost us millions of jobs; and make every public college and university in this country tuition free."
Mr. Sanders mentioned free tuition several times during the debate. He plans to pay for this with increased taxes on Wall Street. Mr. Sanders made this clear by stating, "I want Wall Street now to help kids in this country go to college, public colleges and universities, free with a Wall Street speculation tax."
As far as tax rates, appears that rates would go up under Mr. Sanders. He added, "Donald Trump and his billionaire friends under my policies are going to pay a hell of a lot more in taxes today--taxes in the future than they're paying today."
Social Security did come up in the debate. Mr. Sanders commented, "the way you expand it is by lifting the cap on taxable incomes so that you do away with the absurdity of a millionaire paying the same amount into the system as somebody making $118,000." While he did not elaborate on how his example would be possible, he was not challenged in the debate about his comment. The taxable rate for those making over a million dollars a year is 39.6%, versus 28% for those making $118,000.
Hillary Clinton started her debate by stating, "We have to figure out how we're going to make the tax system a fairer one. Right now, the wealthy pay too little and the middle class pays too much. So I have specific recommendations about how we're going to close those loopholes, make it clear that the wealthy will have to pay their fair share, and have a series of tax cuts for middle-class families." Mrs. Clinton did not add more detail to her specific plan during the debate. She did recently release her proposals on high-frequency trading on Wall Street that might be part of her tax plans.
Mrs. Clinton added, "the economy does better when you have a Democrat in the White House, and that's why we need to have a Democrat in the White House in January 2017."
The other three candidates provided little detail on their positions on tax rates or proposals to overhaul the existing system. They did, however, provide the following snapshots of their views.
Martin O'Malley's only insight on his economic positions was the following with regard to regulating the banks. Mr. O'Malley stated, "We need to reinstate Glass-Steagall, and that's a huge difference on this stage among us as candidates." As a fresher, it sounds like Mr. O'Malley wants to limit "big banks" from investment banking and other security related transactions.
Former Virginia Sen. Jim Webb shared his views on increasing taxes on profits of large banking corporations. Mr. Webb mentioned, "I introduced a piece of legislation calling for a windfall profits tax on the executives of any of these companies that got more than $5 billion, that it was time for them, once they got their compensation and their bonus, to split the rest of the money they made with the nurses and the truck drivers and the soldiers who bailed them out."
Lincoln Chafee thinks the existing progressive tax system is fine, but he suggested we add a 45% tax bracket for those earning $750,000 or more. Mr. Chafee added, "it all started with the Bush tax cuts that favored the wealthy. So let's go back to the tax code. And 0.6 percent of Americans are at the top echelon, over 464,000, 0.6 Americans. That's less than 1 percent. But they generate 30 percent of the revenue. And they're doing fine. So there's still a lot more money to be had from this top echelon. I'm saying let's have another tier and put that back into the tax bracket. And that will generate $42 billion."
If you were looking for some big ideas or tax reform proposals, it appears this was the wrong debate. The candidates have been able to move markets with their comments and ideas. It appears that Wall Street, the wealthy and "big banks" are in the Democrats' crosshairs regardless of who gets nominated.
What do you think of raising taxes and how it will affect investment and economic growth?
The full transcript of the debate is online courtesy of the NY Times.