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capital gains tax
We Need an Anti-Billionaire Party
The way back for the Democratic Party begins with rejecting billionaires and their money.
Nov 16, 2024
Everything feels different this time. In November 2016, there were protests; today, mostly silence. In November 2016, there was a lot of talk about resistance; today, people are talking about stepping away from politics. In November 2016, people clamored for news; today, folks are logging off. In November 2016, there was shock. It has been replaced by numbness. But best to take the words of Joni Mitchell to heart, that “something’s lost but something’s gained, by living every day.”
The warning signs were hiding in plain sight, even at the Democrats’ ecstatic four-day August convention in Chicago that felt more like a warehouse rave than a political confab—a vibe-shift that sent delegates back home convinced that their nominee Kamala Harris was about to vanquish Donald Trump from American political life for good.
But in an election year in which there was fury from the middle class over how much it costs to get by in today’s America, some observers—especially in the party’s left flank—were appalled at the barely hidden embrace of big money. Across the Windy City, in rented venues like the House of Blues, lobbyists for industries like crypto or PACs funded by firms like Cigna or AT&T threw posh late-night private parties for Democratic insiders after the TV lights were turned off.
The current Democratic brand is toxic—especially with working-class voters who have no idea what the party stands for. It’s past time to cast out the money-changers and stop pandering to millionaires and billionaires who may be pro-abortion rights or support the LBGTQ community, but who mainly just want to keep America’s unequal economic status quo.
But one pivotal moment inside the United Center even horrified the seen-it-all investigative journalist and former Sen. Bernie Sanders speechwriter David Sirota, who noted that a line from Illinois governor and Hilton hotel heir J.B. Pritzker—“Take it from an actual billionaire, Trump is rich in only one thing, stupidity”—caused “raucous applause from an audience overjoyed to have found its newest billionaire idol.”
Sirota and others who heard it knew instinctively that this was not a winning message for the party that once dominated American politics in the mid-20th century by turning out the working class, and Tuesday’s results proved them right. In the flaming wreckage of an election in which Trump won a return ticket to the White House by winning the popular vote for the first time in three tries, while his fellow Republicans were capturing control of Congress, both pundits and Democratic insiders have spent the last week fighting over who to blame.
For these wounded elites, prime suspects include everything from President Joe Biden’s insistence on running and staying in the race until July, to Harris’ failure to reach young men by not going on testosterone-laden shows like Joe Rogan’s podcast, to the party’s collective inability to feel consumers’ pain over the post-COVID spike in prices. But you don’t need to be a rocket scientist or even a political scientist to argue that the biggest blunder was not attacking the billionaire class because Harris was too busy begging for their campaign checks.
If there is one thing that gets working-class Americans across the familiar fault lines of political ideology or race or ethnicity to agree, it’s that the super rich have too much wealth and power and don’t pay their fair share. In March, a Bloomberg News/Morning Consult poll of voters in the seven key swing states found some 69% of voters—including 58% of Republicans and 66% of independents—supported higher taxes on billionaires. That populist fervor is hardly surprising in a nation where the top 10% controls 60% of all wealth, while the bottom half struggles with just 6%.
But while the Harris campaign did pay lip service to raising taxes on the super wealthy, it didn’t give voters the red meat of a soak-the-rich campaign that might have landed emotionally in a nation that most voters believe is on the wrong track. That’s probably because Team Harris, with its ambitious yet eventually reached goal of raising $1 billion in order to outspend Trump on TV ads and getting out the vote, felt it needed to woo Big Business, not offend it with a truly populist campaign.
A New York Times post-mortem on what went wrong with the vice president’s messaging and proposals noted in its headline that she had a “Wall Street-Approved Economic Pitch” that “Fell Flat” with voters, writing that Harris “adopted marginal pro-business tweaks to the status quo that both her corporate and progressive allies agreed never coalesced into a clear economic argument.”
It was arguably worse than that. One of the Democrat’s few firm economic proposals was a 28% capital-gains tax plan that was actually lower and thus more friendly to the wealthy than what Biden had been proposing. Much of her economic agenda, according to the Times, was bounced off a key adviser: her brother-in-law Tony West, a corporate lobbyist for Uber—and it showed. Although the Biden administration had been cracking down on abuses in cryptocurrency, Harris signaled support for the scam-plagued, polluting industry, and won over some new donors.
Harris even campaigned with a billionaire—the colorful Dallas Mavericks owner Mark Cuban—who went before a Wisconsin rally to say the Democrat “has an amazing plan for small business,” even after he’d initially lobbied for Harris to dump controversial tough-on-business Federal Trade Commission chief Lina Khan. Watching Harris’ carefully calibrated campaign, it’s also hard not to wonder whether her tepid talk about reining in fossil fuels and even her weak-tea echo of Biden’s Gaza policies—unpopular with many young voters—were meant more for donors than for voters.
It can’t be a coincidence that Democrats’ decades-long embrace of the donor class in an era of big-money politics has disabled its potential populist message to working folks who elected FDR, JFK and Bill Clinton. The Democrats need radical change in a hurry if the party wants to retake the House in the 2026 midterms and start the search for a new leader who can replace Trump in the 2028 election—assuming that we’re still having those by then.
That won’t happen under the current Democratic leadership or its consultants, who owe their status to the party’s wealthiest supporters. Any serious political movement to reinvent the anti-MAGA left will have to start from the bottom-up—with meetings and phone calls and rallies by community activists and environmentalists and ministers and everyday folks. The goal must be finding a new breed of candidates who will reject all billionaire and corporate contributions. That can help remake Congress and eventually boost a presidential candidate truly committed to taxing the rich, waging a new war on poverty, cutting the wasteful Pentagon budget and expanding the Supreme Court to protect these gains.
Sound crazy? Such a movement happened in this century, when the Tea Party emerged in 2009-10 to challenge established Republicans with new grassroots organizations that met regularly, staged boisterous protests and primaried GOP incumbents, pushing their party furtherto the right. That short-lived counter-revolution set the stage for Trump, and for last week’s big victory.
The current Democratic brand is toxic—especially with working-class voters who have no idea what the party stands for. It’s past time to cast out the money-changers and stop pandering to millionaires and billionaires who may be pro-abortion rights or support the LBGTQ community, but who mainly just want to keep America’s unequal economic status quo. Build a new Democratic Party that bans big money, because elections are won with votes, not dollars. The next Democrat who brags about how obscenely rich he is should be booed out of the arena.
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State Victories Against Inequality to Celebrate Despite Bleak Election Day
Any near-term policy progress will have to start at the city and state levels and work its way up to the federal level. Three progressive tax victories from last night are an encouraging sign.
Nov 06, 2024
If you’ve ever questioned whether our country has an inequality problem, this election should provide all the evidence you need. As billionaires used their financial firepower to throw support their preferred candidates’ way, Americans who’ve been left behind took out their frustrations at the ballot box.
How do we get started on this next chapter in the fight to reverse extreme inequality? With Senate Republicans still short of a filibuster-proof supermajority, next year’s debate over the expiration of the Trump tax cuts could still present one opportunity.
But it’s also likely that any near-term policy progress will have to start at the city and state levels and work its way up to the federal level. Three progressive tax victories from last night are an encouraging sign.
In addition to these fair tax victories, I’m heartened by the passage of pro-worker reforms in several “red” states last night—in sharp contrast to the positions of their Republican representatives in the U.S. Congress.
Washington state’s Initiative 2109 was the most important tax-related ballot measure of the year. Hedge fund executive Brian Heywood bankrolled this campaign, hoping to repeal the state’s innovative capital gains tax on high earners.
With 62% of votes counted, the rollback proposal went down in a 63-37% landslide.
“This victory shows that advocacy in support of creating a more equitable tax code works,” Melinda Young-Flynn, communications director at the Washington State Budget and Policy Center, told Inequality.org.
“So many groups and individuals—including business owners, labor unions, teachers, racial justice advocates, parents, lawmakers, and many more—have worked together for more than a decade to help the public at large in our state make the connection between commonsense progressive taxes and the very real needs of our communities.”
Introduced in 2022, Washington state’s path-breaking policy imposes a 7% excise tax on capital gains from the sale of stocks, bonds, and other assets that exceed $250,000 per year (excluding real estate sales). Who makes that much from their financial investments? Fewer than 1% of the state’s richest resident.
Prior to the introduction of this tax in 2022, Washington’s wealthy had flourished under a state constitution that prohibits income tax. The capital gains tax does an end-run around that ban and the state supreme court has ruled it constitutional.
In its first two years, the capital gains levy has raised $1.3 billion for investments in childcare and early learning, public schools, and school construction.
“The people of Washington have sent a clear message,” says Young-Flynn. “The well-being of kids takes precedence over tax breaks for the ultra-wealthy. All those of us who care about economic justice know it’s well past time to stop giving the ultra-wealthy a special deal in the tax code at the expense of everyone else.”
Washington state voters also beat back an effort to allow employees to opt out of a new payroll tax for long-term care insurance if they waive the benefit of that state-operated program. If this measure had passed, it likely would’ve rendered the insurance program financially unviable. Fortunately, voters rejected the proposal by a 55-45% margin.
In Illinois, voters expressed support for an extra 3% tax on income of over $1 million, with revenue going to property tax relief. With 89% of votes counted, Illinois voters approved the ballot measure by an 89-11% margin. While this measure is nonbinding, organizers hope this victory will stoke efforts to put a constitutional amendment on the ballot in 2026 to authorize the new tax on the rich.
In addition to these fair tax victories, I’m heartened by the passage of pro-worker reforms in several “red” states last night—in sharp contrast to the positions of their Republican representatives in the U.S. Congress. Voters in Nebraska, Missouri, and Alaska approved guaranteed paid leave and Missouri and Alaska also passed state minimum wage hikes.
A friend just wrote to me with this message: “A tree outside my window is nearly bare. Perhaps it is an image of our national life this morning. We have a choice: to focus on the bare branches or to appreciate the colorful leaves.”
These state victories against the scourge of inequality are some of the colorful leaves I’m appreciating today.
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Meet the 11 Private Equity Donors Trying to Buy the 2024 Election
The financiers are spending big on candidates that will preserve the carried interest tax deduction, which allows them to pay a lower 23.8% tax rate on the capital gains passed on to them as compensation rather than the top income tax rate of up to 40.8%.
Aug 05, 2024
Eleven of the top 50 individual contributors to political campaigns this election cycle work in the finance industry—specifically in private equity—and are betting big on congressional and presidential candidates who will protect one very special federal tax break worth billions of dollars to them: the carried interest loophole.
So far this election cycle, these 11 private equity billionaires have already contributed more than double the amount that more than 147 private equity firms pumped into federal elections in all of the 2016 election cycle. Private equity—which largely entails rich investors buying and selling companies—is only a part of a larger finance industry that includes hedge funds, securities firms, banks, and investment companies and managers.
This loophole, of course, is not the only tax perk that private equity firms favor. They also push to keep the tax rate on capital gains much lower than the tax rate on ordinary income.
Finance—securities and investments—tops the list of industries giving the most money to date this round, with more than $1 billion in contributions to candidates, parties, and PACs, according to the nonpartisan political funding tracker Open Secrets.
The 11 private equity leaders have contributed more than $223 million to congressional and presidential candidates and the super PACs that support them, accounting for almost 20% of all money contributed by thousands of companies in the finance sector, according to Open Secrets data. During the 2016 election cycle, the Center for Media and Democracy (CMD) reported that the 147 private equity firms it analyzed contributed $92 million to candidates and super PACs.
The carried interest tax deduction allows private equity investment managers to pay a lower 23.8% tax rate on the capital gains passed on to them as compensation rather than the top income tax rate of up to 40.8% they would pay on the same amount if it were considered wage or salary income.
“Carried interest is a form of compensation paid to investment executives like private equity, hedge fund and venture capital managers,” CNBCexplains. “The managers receive a share of the fund’s profits—typically 20% of the total—which is divided among them proportionally. The profit is called carried interest, and is also known as ‘carry’ or ‘profits interest.’”
The $223-million investment these 11 private equity billionaires are making in campaign contributions in hopes of keeping the loophole intact will save the industry an estimated $14 billion in taxes over 10 years, as Senate Democrats pointed out in 2022 when they were forced to let go of legislation to get rid of it.
This loophole, of course, is not the only tax perk that private equity firms favor. They also push to keep the tax rate on capital gains much lower than the tax rate on ordinary income. And some private equity managers have other public policy interests, like billionaire Jeffery Yass, the largest individual donor this election cycle, who gives millions of dollars to school choice groups and other conservative causes.
On April 15, 2024, Sen. Tammy Baldwin (D-Wis.) introduced the Carried Interest Fairness Act (S. 4123), which she co-sponsored with 14 other senators, in order to eliminate the tax loophole, something that Democrats have long sought to fix. The proposed legislation treats the buying and selling of companies as ordinary income if that is a firm’s primary business. “By closing the carried interest loophole, we’ll make our tax code fairer for working families, cut the deficit, and ensure that those at the top of the food chain aren’t exploiting the system to further enrich themselves,” Baldwin said in a press release.
While 90% of the private equity contributions made so far this election cycle have gone to Republicans or the PACs that support them, not every Democrat is opposed to eliminating the loophole.
Before Sen. Kyrsten Sinema (I-Ariz.) left the party to become an independent in 2022, she “courted private equity titans and received the maximum allowed amount from the PACs of leading private equity firms such as The Carlyle Group, along with the industry’s trade organization, the American Investment Council (AIC),” CMD reported.
Private equity billionaires have dramatically increased their spending since Sinema decided not to run for reelection this year.
In 2017, as part of then-President Donald Trump’s Tax Cuts and Jobs Act, the length of time needed to trigger the long-term capital gains tax was raised from one year to three just for private equity. The loophole itself was kept in the bill because of fierce industry lobbying, even though Trump groused that those who took the tax break were “getting away with murder.”
Former President Barack Obama and President Joe Biden both pledged to get rid of the unfair tax loophole. Obama never followed through, and Biden dropped the loophole fix from the Inflation Reduction Act due to opposition from Sinema. Anti-tax zealot Grover Norquist compares the situation to a dog chasing a bus. “You didn’t mean to catch the bus, you meant to whine about the bus,” he famously said.
Vice President Kamala Harris, the presumptive Democratic nominee for president, has made few comments so far on private equity and has not yet expressed her views about the carried interest loophole.
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