Zooming Out on the Tax Debate

“Our shared social compact and prosperity depend on our tax code.”

Recent news headlines have featured a number of splashy tax ideas, including proposals calling for middle-class tax cuts. Roosevelt President and CEO Elizabeth Wilkins outlined Roosevelt’s vision in a new blog post, arguing that we can’t lose sight of the bigger picture: how the tax code structures both our economy and democracy.

Tax policy should, at a baseline, do three things:

• allow the economy to sustain public goods and invest in shared prosperity
• prevent extreme concentrations of wealth from distorting the economy
• bind us all to one another and to our government by fostering a sense of shared national purpose

“Proposals that hollow out the tax base in the name of relief fall short,” Wilkins writes. “They treat taxes only as a burden to be eased rather than as a foundation for democratic governance itself.”

Many of the proposals to cut taxes for the middle class are well-intentioned, but as Wilkins explains, “For most middle-income households, the main sources of their economic pain these days are the cost of essentials like housing, health care, and childcare—not high income taxes.”

Read the blog post here: Beyond Who Pays More: How Taxes Form the Foundation of Our Economy and Democracy

What Else We’re Up To

• Defending the DPA—when used right: Earlier this month, President Trump’s Department of Energy successfully invoked the Defense Production Act (DPA) to override California state regulators and restart an offline oil and gas pipeline. It’s “a reminder of the outsize influence of the fossil fuel industry,” write Roosevelt’s Todd N. Tucker and Joel Dodge of the Vanderbilt Policy Accelerator in new analysis.
  • But Trump’s harmful usage of the DPA doesn’t mean it should be abandoned, Tucker and Dodge argue. It’s one of the government’s most powerful tools, and could be instrumental in achieving clean energy abundance.
  • “Policymakers have often been too reluctant to deploy the full suite of crisis-management tools at their disposal,” they write. “Given the urgency of our challenges, we can ill afford to unilaterally disarm from using these tools.”
• Strait talk: In a new blog post, Roosevelt Principal Economist Michael Madowitz previews upcoming economic data, starting with next week’s jobs report: “It’s probably too soon for the energy shock stemming from the war in Iran to show up fully in the job market,” he writes. “But the economy was already flashing warning signs before that shock hit.”

What We’re Talking About

What We’re Reading

• The AI bubble might be closer to popping. The AI industry supply chain relies heavily on the Middle East. Analysts are warning that the war in Iran could be destabilizing enough to cause a crash, which would have far-reaching effects. “There’s a reason to think we’re seeing some of the same 2008 dynamics now,” Roosevelt’s Brad Lipton said to The Atlantic.
  • “Bubbles pop. That’s the system,” Lipton said. “What isn’t supposed to happen is that it takes down the whole financial system. But the concern here is that AI investment isn’t confined and may spread to the whole economy.”
• “That looks like disproportionate power.” Roosevelt Fellow Brian Galle speaks with Troy Wolverton of the San Francisco Examiner about the need for tax reform to address the political and economic instability that comes fromextreme wealth concentration. The Examiner dives deep into Galle’s FAST tax proposal, How to Tax the Ultrarich, published by Roosevelt last year.
• Zoning reform isn’t enough for housing affordability—financing is key. In a new Groundwork Collaborative report, J.W. Mason and Mike Fellman argue that because some types of housing will always be unprofitable for investors, public sector involvement is key to addressing the housing affordability crisis.