July 2, 2017
Senior Policy Analyst
July 2, 2017
Despite his rhetoric, President Donald Trump’s recent budget proposal laid bare that he is certainly no populist. His budget uses a wrong-headed mythology denigrating low- and middle-income families to justify draconian cuts to critical safety net programs and huge new tax cuts for the rich. Far from being populist, President Trump’s budget would result in a massive redistribution of resources away from the vast majority of Americans to the wealthy and large corporations.
A truly populist budget would seek to ensure that middle- and low-income families have the resources that they need to get ahead, that the wealthy and corporations are paying their fair share in taxes, and that our country is making the public investments we need to ensure full employment and improve productivity over the long term. The Congressional Progressive Caucus’s (CPC) 2018 budget proposal would make real progress on all of these fronts.
On the revenue side, the CPC budget proposes a series of progressive tax reforms, including many of the top recommendations recently offered by the Institute on Taxation and Economic Policy (ITEP). The CPC budget would increase the progressivity of the individual income tax code by eliminating the preferential tax rate on capital gains and dividends, restoring the pre-Bush tax rates on individuals making over $250,000 and enacting higher tax brackets on individuals making over $1 million. According to an ITEP analysis of these provisions in the budget, they alone would raise nearly $1.6 trillion in revenue over the next 10 years. In addition, the budget would improve progressivity by limiting the value of itemized deductions, increasing the estate tax (by raising the tax rate and lowering the exemption level), and expanding the highly effective Earned Income Tax Credit to workers without children in the home.
The CPC budget also includes important corporate tax reforms. The budget would effectively end offshore tax avoidance by no longer allowing corporations to defer paying taxes on their offshore earnings and implementing anti-inversion provisions. The budget would also end the infamous stock option loophole, which allows corporations to deduct fictitious costs of compensating executives with stock options.
The CPC budget would make our tax system fairer while ensuring that the United States raises enough revenue to make the public investments we need without running up unsustainable deficits. Altogether, the budget would raise federal revenue as a share of gross domestic product (GDP) from 18.2 to 22 percent. While anti-tax conservatives might rail against this significant tax increase, even at this level the United States would still rank as one of the least taxed countries in the developed world.
The CPC budget would direct most of this new revenue into much needed public investments. Such investments include significantly expanding access to healthcare, education, and overhauling our transportation, water, and energy infrastructure. The CPC budget would also reduce the deficit by over $4 trillion over 10 years. By raising taxes on the wealthy and corporations and directing those revenues into investment that would empower middle- and low-income families, the CPC budget shows what a real populist budget looks like.