As a means of protecting lower- and middle-income taxpayers from future tax hikes, the Democratic House Minority Leader has proposed a piece of legislation that would require a three-fifths “supermajority” vote in order to take any legislative action that would have the effect of raising taxes on lower- or middle-income taxpayers. The proposal would protect the lowest-earning 80 percent of taxpayers. Taxes on the top 20 percent of earners could be raised with a simple majority vote.
Although the bill has yet to be finalized, we asked Professors Robert Bloink and William Byrnes, who are affiliated with ALM’s Tax Facts, and hold opposing political viewpoints, to share their opinions as to how the Democrats’ supermajority voting requirement would work, and whether it might be an effective means of equalizing lobbying power.
Below is a summary of the debate that ensued between the two professors.
Bloink: This new Democratic proposal is a great way to protect lower- and middle-class taxpayers from situations like we saw last year, where a sweeping tax reform bill was passed and primarily benefited the wealthy. I do see potential issues with the proposal, but it’s far from finalized yet and could see substantial changes before its even subject to a vote in the new Democrat-led house.
Byrnes: My first problem with this proposal is–how do we determine which tax provisions solely raise taxes on the top 20 percent of earners? This new rule would make it incredibly difficult to ever raise taxes on anyone—not that I’m in favor of raising taxes, but we do need to consider the potentially detrimental impact on tax revenues.
Bloink: Professor Byrnes’ argument doesn’t actually seem to be a problem with the idea of protecting lower income taxpayers at all, and is more of a technicality that can be addressed in the bill’s final form.
Byrnes: But how? It just seems to me that this bill would make it virtually impossible to change most of the tax code without excessive support for any given change. Consider the lower long-term capital gains tax rates. The 20 percent rate that applies to certain carried interest and strongly benefits extremely wealthy hedge funds and other private investment funds also benefits…well, any American taxpayer with an investment that would be subject to long-term capital gains tax rates when sold. Raising the corporate tax rates? Well, that could impact the lower and middle classes because the corporations would pass those tax hikes along in the form of reduced wages and higher priced goods.