Biden’s infrastructure tax hike worries some Democrats about impact on wealthy voters

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Alex Roarty, Francesca Chambers
·6 min read
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Can President Joe Biden keep the loyalty of the wealthy, suburban Americans who helped put him in the White House — many of them former Republicans — even when he pushes for tax increases to fund priorities such as infrastructure?

That’s the challenge ahead for the Biden administration, a week after the president detailed a new $2 trillion infrastructure plan he proposed to pay for primarily by raising the corporate tax rate to 28% from 21%.

With former President Donald Trump out of office, some Democrats concede that tax and spend policies could make them begin worrying about their own pocketbooks and reshuffle their political priorities.

“There were a significant number of wealthy voters who held their nose and voted for Democrats last cycle because Joe Biden is a decent man and they couldn’t take anymore of Trump,” said Jason Bresler, a former political director for the Democratic Congressional Campaign Committee. “And this is going to be a challenge to that, no doubt about it.”

Biden’s infrastructure plan is the first of a two-part proposal the White House says will be funded by raising rates on the wealthy and corporations. It has emphasized Biden’s campaign pledge that tax increases will only affect individuals making more than $400,000 a year.

The tax increases that Biden is proposing Congress pass into law have the support of most Americans, according to polls. But in swing congressional districts, even some supporters of the proposal say the president and his allies may have some work to do to convince voters.

Republican and Democratic strategists alike say at stake in the argument over taxes is whether wealthy, suburban voters were only temporary Democratic supporters because of Trump and the pandemic, or whether they’re poised to snap back to the GOP in coming elections.

“Some of them obviously have permanently moved. But others have moved from Republican to Democratic-voting independents,” said Mike Bocian, a Democratic pollster.

Future Majority, a group that formed during Trump’s presidency and advises Democrats on policy and messaging, polled 37 congressional battleground districts last month on Biden’s plan as outlined during his campaign.

The March survey found that Biden’s proposal to raise the corporate tax rate to 28% had the support of 35% of independents and 50% of voters in those districts, according to Mark Riddle, the group’s president. Democratic voters and Republican voters came down mostly on party lines at 91% and 12% supporting it, respectively.

“I think it’s a good opening salvo, and it’s obviously popular with Democratic voters and enough independent voters to get to a majority,” said Riddle, a Democratic strategist who founded the Unite the Country super PAC that boosted Biden during the presidential election.

Riddle said the infrastructure proposal overall had the support of 70% of suburban women, a group that the White House is seeking to attract.

“What the President is certainly appealing to what has become a key voting bloc in both 2018 and 2020, which is suburban women,” Riddle said. “They’re right on target on it.”

Democrats point out that in the recent past, they have embraced tax increases on wealthier Americans and emerged politically unscathed. Former President Barack Obama supported tax increases on the wealthy during the 2012 campaign, for instance, and signed into law legislation that raised them the next year.

And Biden said as a candidate that he would raise the tax rate on corporations and wealthy individuals. That didn’t stop him from winning the suburban vote last year, 50% to 48%, according to exit polls, four years after Hillary Clinton lost it to Trump, 45% to 49%, according to exit polls.

The debate over taxes for the infrastructure bill has already exposed how politically fraught the issue can be, particularly in areas where Democrats made their largest gains during Trump’s presidency.

Democratic Sen. Joe Manchin of West Virginia this week said he would support only a more modest increase in the corporate tax rate, while Transportation Secretary Pete Buttigieg last week had to clarify that the administration was not considering a tax based on vehicular miles.

In districts with higher concentrations of wealthy suburban voters, meanwhile, some Democratic lawmakers are arguing that a de facto tax cut must be included in the legislation, saying that a provision in the Republican 2017 tax law capping state and local tax deductions (known as SALT) should be removed. The deduction gives residents of high-tax states the opportunity to reduce their federal tax bill and removing the cap would allow higher deductions.

“My community was badly hurt by capping the SALT deduction, so I do want to see that cap go away,” said Democratic Rep. Jim Himes of Connecticut.

Himes, unlike some of his colleagues, said he would still vote for the legislation even if it didn’t do away with the cap because the infrastructure bill was too important to vote against.

But the commitment to delivering a tax cut in these districts was evident during the 2018 midterm election, when Democrats took the House majority primarily by winning in traditionally Republican suburban districts. Bressler, then the political director for the House Democrats’ political arm, said Democrats that year bashed Republicans over placing the cap on SALT deductions.

“The reality was, they were also hurting the bottom line,” he said. “And there will always be bottom-line voters. And we were able to take advantage of that.”

SAME MISTAKE

The danger for Democrats is repeating the same mistake as the Republicans, introducing tax increases that affect these same voters in the same districts, strategists say.

To Democratic strategists, including those close to the president, the tax plan is finely calibrated to earn the most support, drawing extra revenue from the least sympathetic segments of the tax base. A report released last week from the Institute on Taxation and Economic Policy, a progressive group, said that more than 50 of America’s largest companies paid no federal taxes last year.

“If Democrats control the tax narrative, it will be good for them, because otherwise they will just be branded by Republicans as tax increasers anyway without any push back. You can’t hide from this fight. So control it and win it,” said John Anzalone, a pollster for Biden’s campaign.

Biden in a Wednesday speech defended tax increases in his package, saying it’s not fair to the rest of the country for large corporations to pay nothing in federal income taxes .

“I’m not trying to punish anybody,” he said. “But dammit, maybe it’s because I come from a middle class neighborhood, I’m sick and tired of ordinary people being fleeced.”

Republicans say that raising the federal corporate tax rate will send jobs overseas and cause companies to raise prices and cut worker wages in order to redistribute the cost of the tax increases.

They argue that other tax increases proposed by Biden during his campaign and could fund the second part of his infrastructure package would negatively impact small business owners.

“They’re going to be killing jobs. Here you are finally coming out of a pandemic, the economy’s gonna be booming,” said Marc Short, founder of the Coalition to Protect American Workers — a group that formed to fight Biden’s tax agenda. “Their tax plan would crush that.”

Short, the former chief of staff to Vice President Mike Pence, added, “This is going to be broader than saying, ‘Hey we’re just taxing billionaires.’ They’re going to be taxing those suburban families too.”