Back by populist demand — tax hikes?
President Joe Biden made it a point to come into the White House and, like Donald Trump before him, systematically dismantle the legacy of the man who was leaving office. That promise has been a mixed bag — Biden has kept most of Trump’s tariffs on China in place, he’s struggling to push through his Title IX rewrite, and his border policy has been sporadic. One area in which he has struggled to make any headway has been taxes.
Trump’s “Tax Cuts and Jobs Act,” more commonly referred to as the “Trump Tax Cuts,” that lowered the corporate tax rate from 35% to 21% hasn’t gone anywhere. The stickiness of the cuts is down to it getting passed through both chambers of Congress and being signed into law in 2017. Presidents have a lot of power, though their authority stops at being able to overturn law unilaterally.
It isn’t going to happen on Biden’s watch, but those tax cuts are set to expire in 2025, and as it stands, it’s not clear how Congress is going to address the looming “tax cliff.” That’s what we are examining this week with our series, and Economics and Business Reporter Zachary Halaschak started us off with a rundown of why the corporate tax rate could pose such a problem for Republicans in particular.
“The 2017 Republican tax overhaul lowered the corporate tax rate from 35% to 21% — and unlike the changes made to individual and estate tax, that cut is permanent in law. Yet the rise of populism in the United States and the demands of international tax competition have coincided to cast doubt on the stability of corporate taxation,” Zachary wrote. “Accordingly, the outcome of the 2024 elections and control of the White House, the House of Representatives, and the Senate will determine how the corporate tax rate is altered in broader talks about taxation and spending.”
“It was Republicans who lowered the rate, but now different factions of the party might seek to change it,” he wrote.
Trump is staying on board with his plan to cut taxes for corporations and for individuals. So far, he has promised to lower the corporate tax rate even further to 15%. Vice President Kamala Harris hasn’t taken a clear position, though Zachary pointed out the Biden administration has argued the rate needs to go back up to somewhere near 28%, which might not be high enough to soothe the left wing of the Democratic Party.
Interestingly, for Republicans, the top of their ticket is of two minds on what to do about what might be Trump’s signature policy achievement. Sen. J.D. Vance (R-OH) has said the rate shouldn’t be cut any further, putting him in soft opposition to Trump.
Should Harris and Gov. Tim Walz (D-MN) win and manage to pull downballot Democrats in House and Senate races with them to achieve a trifecta of federal control, letting the cuts expire and raising the rate shouldn’t be a heavy lift.
The more opaque scenario involves a Trump-Vance win, with the president facing opposition from his vice president and a populist contingent of lawmakers who are skeptical of corporations’ patriotism and would be happy to trade increased corporate taxes in return for cutting individual rates.
Hiking the rate has the backing of conservative intellectuals outside of Congress, too.
“I think there is obviously a huge fiscal crisis, and conservatives are recognizing that we’re going to need to do something about it,” Oren Cass, the chief economist of American Compass, told Zachary. “And so, in general, I think there is a much greater openness to considering raising revenue than there has been in the past, and then the question is: Where should that come from?”
Click here to read more about the looming fight for the future of the corporate tax rate.
Riding Harris’s coattails
Democratic excitement about having a new principal at the top of the presidential ticket has turned a presidential race into a true toss-up. Just as important for the party, it has emboldened depressed voters about the need to show up on Election Day for downballot candidates, too.
Republicans taking back the Senate should almost be a lock. They don’t have to defend any competitive seats this cycle and can focus their resources on going on offense in seven states that have seats up for grabs — Arizona, Michigan, Montana, Nevada, Ohio, Pennsylvania, and Wisconsin. Four of those contests are rated as “toss-ups” by the nonpartisan Cook Political Report, and three are “lean Democratic.”
Former Maryland Gov. Larry Hogan is trying to make the “likely Democratic” contest in Maryland competitive and force Democrats to draw resources away from more intense fights.
Most of the states in play are important for the presidential and Senate contests. In Wisconsin, Harris taking over for Biden might be enough to push both elections to the left, Senate Reporter Ramsey Touchberry wrote for us this morning.
Sen. Tammy Baldwin (D-WI) is running for her third term. She isn’t facing any Democratic challenger in her primary contest on Tuesday. She will likely face off against real estate developer and banker Eric Hovde in November. Hovde is the National Republican Senatorial Committee favorite and is expected to walk to victory over Charles Barman and Rejani Raveendran tomorrow.
While Hovde has his own set of problems — Democrats have been painting him as a “carpetbagger” due to his ties to California — Baldwin’s chances for victory might come down more to the strength of Harris than the weaknesses of her opponent.
“It was tough when the vibe around the top of the ticket wasn’t great,” Baldwin campaign spokesman Andrew Mamo told Ramsey. “But the vibe around the top of the ticket right now is fantastic, and we are seeing more volunteers, more grassroots contributions, more people willing to knock on doors.”
Baldwin had been avoiding making public appearances with Biden when he came into town but has appeared twice with Harris in the three-odd weeks since she took the mantle.
“Very, very exciting,” Baldwin recently told the Washington Examiner after attending a rally with Harris. “I feel like it’s a new beginning to the campaign.”
Hovde and Republicans don’t appear to mind Harris taking over, regardless of the initial boost she is given Baldwin. Their plan is to tie Baldwin to the Biden-Harris administration as closely as possible.
“She voted for every single word of the Biden-Harris economic agenda that’s put us onto the brink of a recession,” a source close to Hovde told Ramsey of Baldwin. “But what’s different now, too, is you add to that the far-left agendas of not only the vice president but also her running mate.”
Click here to read more about the highly anticipated fight in Wisconsin.
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For your radar
Biden has nothing on his public schedule. He and first lady Jill Biden will leave Rehoboth Beach, Delaware, at 8 a.m. to return to the White House.
Harris has nothing on her public schedule. She will record video remarks for the American Federation of State, County, and Municipal Employees’ 46th International Convention.
White House press secretary Karine Jean-Pierre will hold the press briefing at 2 p.m.
