Tax hikes are in the air, at least in Iowa and New Hampshire. For the first time in a while, Democratic presidential candidates are calling for large, even extraordinary tax increases. Most are following a well-worn script, promising hikes only for “the rich” (variously and sometimes vaguely defined). A few have paired that reassurance with a promise to actually cut taxes for the middle class.
Barack Obama must be proud. Or he would be if the current crop of candidates had simply embraced his brand of reasonable, gradual, moderate policy reform. But several of today’s candidates have strayed from the centrist path. Sens. Bernie Sanders of Vermont and Elizabeth Warren of Massachusetts have made the biggest splash, with each proposing innovative (if controversial) wealth taxes. Even ostensible moderates are thinking big, at least in dollar terms. Joe Biden, for instance, has floated tax reforms that would raise more than $3 trillion in new revenue over 10 years. That’s big money by any standard. And a lot of it would come from the nation’s most fortunate few.
The Democrats’ newfound enthusiasm for taxing the rich hasn’t been subtle; many of the candidates have been shouting it from the rooftops. As Howard Gleckman observes for TaxVox: “Among Democratic presidential candidates, raising taxes on the rich has become a thing. A big, loud, high-profile thing.”
Presumably, Democratic candidates think tax hikes are good politics, at least when focused on the rich. And recent polls suggest they may be right; wealth taxes, in particular, seem to enjoy majority support, with even many Republicans endorsing the idea.
Hidden Pitfalls?
For Democrats, these are reassuring numbers. But might some hidden dangers lurk beneath them? Gleckman thinks so. The last Democratic candidate to trumpet his plans for raising taxes was Walter Mondale in 1984, he notes. And what do we know about Mondale? He lost to Ronald Reagan in a rout: 525 to 13 in the Electoral College and 58.8 percent to 40.6 percent in the popular vote. Which should make you wonder, if you’re a Democrat, whether the party is headed for another epic disaster.
Let’s dispense with the easy parts of this historical comparison. Several aspects of the 2020 race look plausibly similar to 1984: (1) the Democrats seem reasonably likely to choose a former vice president as their nominee, (2) that nominee is running against an incumbent president, and (3) the economy is doing well, at least in aggregate terms.
That said, Gleckman notes at least one crucial difference between 1984 and 2020: In December 1983, “the same point in that election cycle as we are today,” Reagan was polling at above 50 percent, whereas “Trump is mired in the low 40’s and facing impeachment.”
That’s an important difference. But approval numbers tend to change. What doesn’t change is history. American politics has changed a lot over the last four decades, and voters in 2020 approach their electoral decisions with a different set of recent historical memories than their counterparts had in 1984.
When Reagan was running in 1984, he was still at the leading edge of the modern conservative movement. His victory in 1980 was transformational, but the real work of conservative governance was just beginning. Reagan’s dramatic tax cuts, the centerpiece of his 1980 campaign, were still a work in progress (economically and politically, if not legislatively). And more broadly, Americans were still taking stock of Reagan and his revolution.
By contrast, President Trump leads a mature conservative movement. He has, of course, refashioned modern conservatism in his own image, especially around trade policy. But the Republican Party of 2020 is still, in many crucial respects, the Republican Party of Reagan. In particular, it continues to put tax cuts at the top of its political and policy agenda.
What does that mean for the current political moment? In broad strokes, it means that voters have had 40 years to assess the GOP style of governance, including its overarching focus on tax cuts. Recent polls suggest, moreover, that they’ve learned to be a little picky about the kinds of tax cuts they like. In particular, voters don’t seem especially enthusiastic about corporate tax cuts — even when packaged with individual tax relief (which helps explain the underwhelming popularity of the Tax Cuts and Jobs Act).
None of that should surprise anyone who’s paying attention. Tax cuts have never been surefire electoral magic. In a pair of 2017 articles, I evaluated two prominent cuts that seemed, at the time, to be tailor-made for winning elections. (Prior analysis: Tax Notes, Nov. 6, 2017, p. 730; and Tax Notes, Nov. 20, 2017, p. 1010.) But neither the tax cut of 1948 nor the tax cut of 1981 did much to boost the fortunes of the Republicans who championed them.
What lesson should we take from the political history of past tax cuts? Modesty. It turns out that tax policy — and any policy, really — is just not that important to voters.
Voters appear to have preferences about tax policy, but those preferences don’t seem to shape voting patterns. As Christopher H. Achen and Larry M. Bartels explained in their 2016 book, Democracy for Realists, policy preferences seem to be a function of partisanship, not a determinant of it. Voters begin by choosing a team, and only later do they give much thought to policy. And when they reach that point, they tend to simply adopt the party’s agenda as their own.
Mondale’s Mistake?
Where does that insight about the irrelevance of policy leave our effort to compare 1984 with 2020? Nowhere good, I think. But first, let’s revisit Mondale’s (in)famous statement — that crucial moment during his nomination acceptance speech when he actually said the quiet part out loud.
“Mr. Reagan will raise taxes, and so will I,” Mondale told the nation. “He won’t tell you. I just did.”
Mondale was hoping to get points for honesty, and maybe he did. But it’s not clear that honesty wins you much goodwill when the message you’re delivering is basically unpopular. And make no mistake: Tax hikes were unpopular in 1984. In a June 1984 survey, conducted about a month before Mondale’s speech, Penn & Schoen Associates asked voters if they preferred tax increases or spending cuts as a way to shrink the deficit: 74 percent chose spending cuts, while just 11 percent chose tax hikes.
Still, Mondale wasn’t completely crazy; he seemed to understand that while Americans might dislike paying taxes, what they really hated was other people not paying taxes. Mondale therefore framed his frank talk in terms of shared — and shirked — responsibilities.
“When he raises taxes, it won’t be done fairly,” Mondale said of Reagan. “He will sock it to average-income families again, and leave his rich friends alone. And I won’t stand for it.” Even more to the point, he delivered a warning to the nation’s tax avoiders: “To the corporations and freeloaders who play the loopholes or pay no taxes, my message is: Your free ride is over.”
That sort of edgy rhetoric has deep roots in American politics; you can find it in the tax debates of every era, from the founding to the present day. If Mondale thought it would work, he might be forgiven the mistake.
And to be fair, we don’t really know whether Mondale’s candor worked or backfired. In the aftermath of his crushing loss, journalists and political strategists tried to make sense of the blowout. They quickly settled on the candidate’s risky tax stance as the most plausible explanation. As The Washington Post observed:
Did the vast majority that elected him give Ronald Reagan a mandate? Of course they did. We hardly see how there can be any argument about that. Huge numbers indicated their preference for the president, and they knew what he was running on and for. They said yes to Ronald Reagan and no to Walter Mondale. They gave the president a mandate and it is very simple. It is a mandate not to raise taxes.
Groupthink is a powerful thing, and when it comes to interpreting elections, it’s almost inescapable. It emerges quickly but exerts a durable influence, shaping historical memory for years afterward.
Every election generates a quest for some sort of explanatory narrative. As political scientist Seth Masket has observed, the impulse to explain is not unreasonable. “There’s nothing wrong with trying to construct a narrative around an election,” Masket wrote in a 2018 article for Pacific Standard. “Elections are pretty blunt tools and their meaning isn’t always clear.”
But it’s wise to be skeptical of these narratives, because most are overdrawn, and all are working to advance an agenda of some sort. “Keep in mind that there is a purpose behind defining a loss in a certain way,” Masket cautioned. “And if that interpretation catches on, it could push the party in a new direction.”
That’s exactly what happened after Mondale’s loss. Democrats settled on the idea that taxes were a leading cause of the debacle. That conviction, in turn, led later nominees to be extremely cautious when it came to taxes. “Sure, most put forward a mix of relatively modest tax hikes on the wealthy and small tax cuts for everyone else,” Gleckman notes in his TaxVox post. “But on the stump they barely acknowledged these proposals, and never gave them the prominence Mondale did.”
The Democrats’ newfound caution marked a break with the party’s past. For a century, Democrats championed progressive tax reform, leading the charge for income and estate taxes while also staving off calls for any sort of national consumption tax. The party’s vigorous support for progressivity formatively shaped the great fiscal watersheds of the 20th century, including both world wars and the Great Depression.
After the disaster of 1984, Democrats muted their support for progressive tax reform, opting instead for the sort of incremental approach that Gleckman describes. And in practical terms, they spent most of the next three decades playing defense, trying to slow the GOP’s consistent and powerful campaign to continue cutting taxes, especially on capital.
Nowadays, of course, things are different. Democrats have rediscovered their party’s ancestral support for progressive taxation, embracing dramatic proposals the likes of which haven’t been seen since the New Deal. Many of the current candidates are proposing tax reforms designed to remake not simply the revenue system, but the economy writ large. Franklin D. Roosevelt would certainly be proud.
The Mondale Bogeyman
Of course, Roosevelt hadn’t lived through the Mondale disaster. Maybe sweeping progressive tax reforms are anachronistic, ill-suited to the realities of a modern, globalized economy. Maybe that’s the lesson of 1984.
But I doubt it. I’m not convinced that the Democrats should be worried about repeating Mondale’s debacle. The comparison to 1984 is reasonable but not especially helpful, given the widely differing contexts. More important, it’s not at all clear that the 1984 disaster was really about tax policy anyway. There were many reasons why Americans might have preferred Reagan to Mondale, including a rate of economic growth approaching 7 percent. It was a pretty good time to be running for reelection.
That said, I’m not sure Democrats should be too sanguine about their prospects — or the political utility of their tax proposals. Sure, those proposals are polling well right now. But even if they stay popular (a big if), they aren’t likely to make a big difference in the election.
Because policy never does.