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Taxing The Rich Is Not The Left's Economic Growth Strategy, Center For American Progress Leader Says

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WASHINGTON -- Higher taxes on wealthy Americans is not the centerpiece of the progressive movement's solution to the nation's economic problems, the head of one of the left's leading think tanks said Wednesday.

Neera Tanden, president of the Center for American Progress, argued that raising taxes on the wealthy is a fair-play way toward short-term deficit reduction, rather than a fix for the U.S.' long-term debt problem. She added that economic growth -- not wealth redistribution -- is an equally high priority for alleviating income inequality.

"Our view is that we should be focusing on economic growth in the immediate term, and long term deficit reduction," she said.

Calls from Democrats to raise taxes on top earners are usually met by the right with the response that the nation's fiscal imbalances cannot be closed by increasing taxes, and that trying to reduce inequality by taking from wealthy Americans and redistributing it to others will simply reduce the economic pie available to all. But Tanden's answer decoupled the tax increase debate from the debt crisis and from growth, instead attaching it to short-term deficit reduction.

"I don't think tax increases are about economic growth. Increasing taxes for the wealthy is not an economic growth strategy," Tanden said in an interview in her downtown office. "That's a way to address deficit reduction. That's a way of saying we're all in this together. Like, if you're going to do deficit reduction, who should bear the burden of that? Should people who have done pretty well over the past few years bear some burden?"

Tanden, an alumnus of the Clinton White House, argued that broader economic growth leads to greater equality. Yet, she said, simply cutting taxes -- rather than increasing them -- in the hopes that wealth will trickle down from top earners is also not the solution. As a result, she said, there is some uncertainty about the way to jolt the American economy out of its sluggish growth.

"Part of the answer is the minimum wage, but that's a strategy to address demand in economy," Tanden said. "I also think we need additional ideas. Infrastructure has been an idea. But how you get economic growth is a complicated picture."

Yet, despite the fact that Tanden said raising taxes is intended to address the deficit, she also said that deficit reduction is less of a priority than it has been in previous years.

"One of the things I think we were particularly successful at [this year] was resetting the terms of the fiscal debate. We did a big paper this spring called 'Time for a Fiscal Reset,'" Tanden said. "We kind of took a step back and saw that deficit projections were coming down, and unemployment projections were not coming down at the same velocity."

"I want to be 100 percent crystal clear in this: the country has long term deficit challenges, so we believe that we should address those, and put good ideas around both taxes and entitlements on the table," she said. "But now I think the priority for the country should be economic growth."

Despite her pro-markets stance on the question of how to spur a U.S. recovery, and her reputation as a close ally of the more economically centrist Clintons, Tanden recently took the side of progressives in a debate with centrist Democrats. Members of Third Way, a moderate Democratic think tank that promotes bipartisan solutions, published an op-ed in the Wall Street Journal chastising the party for embracing an "economic populism" that makes taxing the rich a central tenet.

Progressive groups attacked Third Way, and Massachusetts Sen. Elizabeth Warren herself called on big banks to disclose donations to think tanks like Third Way. Tanden weighed in with a rebuttal to Third Way published in The New Republic, arguing that "a focus on inequality and requiring the wealthy to pay their fair share has ... been a successful political strategy."

In her office Wednesday, Tanden argued that her salvo at Third Way was not simply "a call for higher taxes," but rather a push back against the Third Way argument that a failed referendum in Colorado last month to raise taxes to pay for universal pre-K and school funding was a more significant electoral result than DeBlasio's election in New York.

"I just said you shouldn't conflate tax increases on the rich with tax increases on everyone," Tanden said.

Third Way framed the Colorado proposal as a tax increase "on high-income Coloradans." Tanden pointed out that it was an increase for everyone. The truth is Tanden was more correct, but Third Way's emphasis on higher earners had some basis, since those with incomes above $75,000 a year would have seen their taxes go from 4.6 percent to 5.9 percent, according to The New York Times. But those making less than $75,000 annually also would have been forced to pay more, 5 percent up from 4.6 percent.

Tanden's conclusion on the Colorado referendum was that it "doesn't tell us much." It's there that she and groups like Third Way will continue to disagree, though not on policy. Third Way supports higher taxes on the wealthy, but does not believe that emphasizing tax increases is a winning electoral message.

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