By Laura Davison
(Bloomberg) --Some of the top Democratic presidential candidates are trying to make a name for themselves by calling for higher taxes on the wealthy. And for some wealthy donors, that’s not a problem.
Senators Elizabeth Warren of Massachusetts and Bernie Sanders of Vermont are focusing their 2020 campaigns on trendy new tax-the-rich plans, like Warren’s 2 percent wealth tax or Sanders’ expanded estate tax, as they make their cases against President Donald Trump.
The proposals are exciting small-dollar political donors -- and so far aren’t scaring off wealthy contributors, said Rachael Rice, who advises Maryland Democrats on fundraising. Those deep-pocketed donors are more motivated to unseat Trump than worry about their own wallets, she said.
The plans are emerging as some 20 Democratic contenders try to catch fire in a party that is unified in its hopes of defeating Trump next year. They’re looking to ride a wave that reclaimed the House of Representatives for the party last November and swept many unabashed progressives into office.
Patriotic Millionaires, made up of high net-worth donors, was formed in 2010 to demand an end to President George W. Bush’s tax cuts benefiting top earners. Now, the group is pushing for new taxes on the wealthy and is backing ideas like Warren’s proposed annual 2 percent tax on fortunes of more than $50 million and an even larger levy on assets above $1 billion.
“While some may say the proposal is too extreme, as a millionaire I say it’s far overdue,” Patriotic Millionaires Chairman Morris Pearl, a former executive at BlackRock Inc., said of Warren’s proposal in a blog post.
Democratic donors are also more focused on the bigger progressive picture, said Ken Christensen, a Democratic fundraiser in Washington. That’s true for billionaire Tom Steyer, who was the second-largest Democratic donor in the 2018 cycle, and is pouring millions of dollars into a push to trigger impeachment hearings against Trump and to get the president’s tax returns released.
Another factor helping Democrats this cycle: A few wealthy donors don’t mean as much to a campaign as they once did. In fact, having a wide base of donors is critical to make the first televised primary debate in June. To qualify, candidates must have at least 65,000 unique donors with a minimum of 200 donors per state in at least 20 states.
“Fundraising is going to be a barometer of how viable of a candidate you are,” Christensen said.
Sanders, who propelled his 2016 presidential effort with small-dollar donations, seems set to do the same this cycle. He announced his 2020 candidacy on Tuesday and raised $6 million from more than 225,000 donors, with the average donation at $27, his campaign tweeted.
A key plank in Sander’s platform so far: a much expanded estate tax.
“Democrats for a long time have been very reluctant to talk about taxes,” said Brad Bannon, a Democratic strategist. President Ronald Reagan “created a political climate where any talk of a tax increase was deadly for Democrats.”
That thinking has changed. Late in 2017, Republicans passed legislation that lowered taxes for four in five Americans. But the overhaul was often portrayed as aiding corporate and wealthy taxpayers more than the middle class and ended up a political liability in the midterms. Democrats are now capitalizing on the unpopularity of the law for the 2020 campaigns.
Warren has encapsulated what is likely to become the new Democratic playbook: Rather than propose several social programs and gloss over how to pay for it, she is proposing a revenue-generating tax, building up public support for it and then announcing how she’ll spend it.
She introduced a $2.75 trillion wealth tax last month. On Monday, she announced a plan to use some of the funds for universal childcare. Based on her campaign’s numbers, she would still have about a little more than $2 trillion to allocate to other programs.
Democrats have vowed to repeal much of the GOP tax overhaul -- which slashed the corporate tax rate to 21 percent and reduced taxes for many individuals. Yet reverting to the 2017 status quo isn’t enough for this cycle.
“Any presidential candidate needs to have a bold tax plan,” Gabriel Zucman, an economist at the University of California-Berkeley who has advised Warren. After the tax overhaul “candidates need to explain how they would change the system.”
Sanders would expand the estate tax to apply to estates starting at $3.5 million, down from $11 million, as well as increase the rate of the tax. Freshman Representative Alexandria Ocasio-Cortez of New York, who is too young to seek the presidency herself, has floated the idea of raising the top tax bracket to 70 percent for incomes exceeding $10 million. The ideas have moved the needle on what Democratic primary voters expect to hear.
Polling data show that many voters have long supported increasing taxes on the rich. About 60 percent of voters have consistently said over the past decade that upper-income individuals pay too little, according to data from Gallup.
“The politicians are just now catching up with the voters,” said Democratic pollster Celinda Lake.
Income inequality has also increased and the data showing just how much separates the rich from other Americans has also improved. The top 0.1 percent held about 7 percent of the wealth in the U.S. in the late 1970s, but by 2012, that group had 22 percent, according to research published by Zucman and his colleague Emmanuel Saez.
The trick for Democratic contenders is to be able to translate the popularity of taxing the rich into support for their means of doing it. Sixty-one percent of voters back Warren’s wealth tax and 50 percent approve of Sander’s estate tax expansion, according to a February poll by Morning Consult and Politico.
The taxes on the wealthy make for convenient campaign talking points, but rarely translate into actual legislation once in power, according to Mattie Duppler, a senior fellow at the right-leaning National Taxpayers Union. That’s another factor that may make wealthy donors comfortable contributing to candidates like Sanders and Warren.
Democrats, in 2013, ultimately made permanent many of the tax cuts Bush and Congress passed a decade earlier.
“Democrats talk a lot about raising taxes on the wealthy,” Duppler said. “But when it comes down to it, they rarely take the votes to make it the case.”
To contact the reporter on this story: Laura Davison in Washington at [email protected] To contact the editors responsible for this story: Wendy Benjaminson at [email protected] Laura Davison