A midterm prescription

Delivered every Monday by 10 a.m., Weekly Tax examines the latest news in tax politics and policy.

Feb 14, 2022 View in browser   By Bernie Becker DON'T GIVE UP THE FIGHT: It's no secret that Democrats will face a difficult time protecting their very narrow congressional majorities in less than nine months. With that in mind, the Democratic pollsters John Anzalone and Matt Hogan are urging the party's candidates to focus on forcing the rich and corporations to pay more in taxes. For decades, Democrats have ran scared on taxes, frightened of being tarred as tax-and-spend liberals by Republicans. But embracing higher taxes on the rich was a winning message for both of the last two Democratic presidents, Anzalone and Hogan argued — for President Joe Biden when he unseated Donald Trump in 2020 and former President Barack Obama when he won reelection in 2012. Anzalone and Hogan, who are pollsters for Biden, noted in a new memo being circulated by the progressive group Americans for Tax Fairness that the president's campaign ran an advertisement promising to raise taxes on corporations and not on anyone making under $400,000 a year more than any other spot in the fall of 2020. The lesson, they added, is that Democrats should view raising taxes on the wealthy as politically popular in its own right — not just as a means to offer new benefits to struggling families and the middle class. Democrats also shouldn't be afraid to pound the contrast on this issue with Republicans — who have unanimously opposed the proposed tax increases in Biden's Build Back Better agenda, but also didn't appear to get much in the way of political benefits with their 2017 tax law. "We have a lot of ammunition here on the positive and the negative on the tax front," Anzalone told Weekly Tax. "Don't be afraid of this issue," Anzalone advised Democrats. "Republicans will try to define you. Beat them to it." MORE ON ALL THIS in a bit, but first — thanks for coming to an extra special Valentine's/post-Super Bowl edition of Weekly Tax. Also, when are Matt Damon and Larry David going to talk to us about crypto taxes? Speaking of sweet moments: Today marks 136 years since the first train of oranges left Los Angeles, for sale back east. (Not coincidentally, LA saw quite the boost in population right around this time.) Something sticky going on? Tell us about it. Email: bbecker@politico.com, alorenzo@politico.com, bfaler@politico.com and teckert@politico.com. You can also reach us on Twitter at @berniebecker3, @aaronelorenzo, @tobyeckert, @Brian_Faler, @POLITICOPro and @Morning_Tax.   BECOME A GLOBAL INSIDER:  The world is more connected than ever. It has never been more essential to identify, unpack and analyze important news, trends and decisions shaping our future — and we've got you covered! Every Monday, Wednesday and Friday, Global Insider author Ryan Heath navigates the global news maze and connects you to power players and events changing our world. Don't miss out on this influential global community. Subscribe now.     Want to receive this newsletter every weekday? Subscribe to POLITICO Pro. You'll also receive daily policy news and other intelligence you need to act on the day's biggest stories. LET'S KEEP TALKING POLITICS: Let's be honest — Anzalone long has been pushing the message that calling for tax hikes on the rich is one of the more popular things Democrats can do. Basically every Democrat in Congress had signaled that they would agree to raise hundreds of billions of dollars in taxes on the rich and corporations, before the party's efforts on the BBB got waylaid. (In fact, Sen. Kyrsten Sinema of Arizona was the only Democrat to take issue with raising the corporate rate and top rate on individuals.) But it's fair to note that Democrats aren't universally sure that embracing tax hikes is a political winner. Just take a look at the two tax chairs: Senate Finance Chair Ron Wyden (D-Ore.) is all in on that idea, while House Ways and Means Chair Richard Neal(D-Mass.) — who pushed a measure with big tax hikes through his committee — speaks more cautiously on the issue. For their part, Republicans don't seem particularly threatened about Democrats going on the offensive on taxes, even if some will say they're not surprised that forcing the rich and corporations polls well. (Some in the GOP also believe Democrats leaning in on taxes could help them with higher-income suburban voters who defected when Trump was president, among other things). There are also these questions to consider, given that historical forces are working against Democrats in the upcoming midterms — in addition to some downright middling approval ratings for Biden. How much would a tax-the-rich message move the needle for Democrats, with Republicans likely focusing on inflation, crime and other issues in the campaign? And could this particular argument fall flat for Democrats, if they fall short on significantly raising taxes on the rich and corporations through some offshoot of the BBB that meets Sen. Joe Manchin 's approval? "It's always better to do something than to prescribe it," Anzalone acknowledged. "But if it doesn't get done, it's still disproportionately because Republicans weren't willing to join Democrats. We'd still have a good argument on what's stopping it." LET'S TALK IRS: Here's something that might get some attention — remember that backlog at the IRS that numbered in the millions of pieces of paper? The problem is actually bigger than we all thought, The Washington Post reported — the tax collector still hasn't processed close to 24 million returns from last year. And it doesn't look like it'll be getting better anytime soon, given the IRS's problems replenishing its employee ranks. Based on this response from Neal, this newest revelation also could prompt a new debate about IRS funding — a hot topic for a good decade now. "The IRS needs greater support to carry out its most essential functions, like processing tax returns, enforcing the tax code, and closing the tax gap," Neal said after accusing the GOP of having "starved the IRS of funding." More IRS: There's a good reason that you frequently hear that the tax collector has a lot on its plate. Take this, from our Sam Sabin, in discussing the federal government's battle against cybercrimes: "The IRS' ability to trace dark money has made it a crucial partner to other federal agencies investigating ransomware gangs — a role it played last summer by helping the FBI seize millions of dollars in bitcoin from the hackers who had crippled the U.S. gasoline supply." Semi-related note: "Spouses, taxes and crypto: The unanswered questions for Congress' stock trading ban," via our Katy O'Donnell. Around the World SOME INFLATIONARY ACTION: Turkey is slashing its value-added tax on staple food items in an effort to battle rising prices, Bloomberg reports. President Recep Tayyip Erdogan wants the cut, from 8 percent down to 1 percent, to go into effect quickly, too. Erdogan prodded companies to reflect the VAT reduction starting today, during an appearance at a finance ministry event. NOT INTO IT: Voters in Switzerland have rejected a new proposal to cut taxes on business, Bloomberg also reports. The proposal would have offered companies tax relief on fund raising — and its defeat, on the heels of Switzerland agreeing to join the global tax deal, could just be the latest setback for the country's business-friendly reputation. The government argued that ending the tax, which would cost about 250 million francs (around $270 million), would spur both investment and job growth.   STEP INSIDE THE WEST WING: What's really happening in West Wing offices? Find out who's up, who's down, and who really has the president's ear in our West Wing Playbook newsletter, the insider's guide to the Biden White House and Cabinet. For buzzy nuggets and details that you won't find anywhere else, subscribe today.     Around the Nation PRESSING AHEAD: The West Virginia House passed a measure on Friday that would cut each income tax rate in the state by 10 percent, The Associated Press reports. Republicans in the state House have long wanted to move more cautiously on income tax cuts than Jim Justice, West Virginia's GOP governor. The House unanimously rejected Justice's more sweeping income tax cut a year ago. Still, Democratic lawmakers in the state argued that the House GOP proposal would give too many benefits to the better off, and almost nothing to more struggling families. Finished pressing ahead: Gov. Spencer Cox signed a $193 million tax cut in Utah on Friday, the AP also reported. Utah is slicing its income tax rate from 4.95 percent to 4.85 percent and installing a state earned income tax credit as part of the measure, which passed the legislature with bipartisan support. The tax cut did not include tax relief for groceries, which some lawmakers from both parties also sought. Quick Links Pro Tax: "IRS processes nearly 13 million new returns early in tax season." Bloomberg: "Tax Refunds From IRS Are Smaller Than Last Year's, Data Show." The Oregonian: "Oregon lawmakers plan to extend tax break that rewards owners of million-dollar historic homes." AP: "House passes Georgia amended budget with raises, tax rebates." Did you know? The orange roughy fish is also known as the slimehead.   Follow us on Twitter Toby Eckert @tobyeckert Bernie Becker @berniebecker3 Brian Faler @brian_faler Aaron Lorenzo @aaronelorenzo   Follow us

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