The Democrats Call Dibs on the Middle Class

A proposed $1.2 trillion tax-cut package could shape the economic debate in Congress and on the campaign trail.

Representative Chris Van Hollen, Democrat of Maryland (Kevin Lamarque/AP)

When Democrats returned to Washington following the November congressional elections, the defeated party turned, in predictable fashion, on itself. Blame for the losses flew from the Senate to the White House, from the White House onto bumbling and overly cautious candidates, and back around again. But one of the more resonant postmortems came from House Democrats, who recognized that the party's agenda and message simply did not compel its core voters to turn out as they did in reelecting President Obama in 2012.

Like Republicans in that election, Democratic candidates in 2014 spent too much time bashing their opponents (ginning up the worn theme of a GOP "war on women," for example) and not enough time touting either the economic success of the Obama administration or their plans for what to do next. The economic program they did offer—centered on raising the minimum wage and a hodgepodge of other modest initiatives—paled when compared to the ambitious proposals that had carried Obama and his allies into office in the first place. And it did not do enough to motivate the middle class or its concerns about stagnant wages and a decline in economic mobility.

On Monday, one of the leading Democratic policy-makers in the House, Representative Chris Van Hollen of Maryland, offered a new and more aggressive economic blueprint that may well become a rallying point for the party in 2016. The headline proposal is a $1.2 trillion package of tax cuts for middle-income earners, including a $1,000 "paycheck bonus credit" for individuals making less than $100,000 a year, and twice that amount for couples earning less than $200,000 annually. Van Hollen, who is the top Democrat on the Budget Committee, would also expand the earned income tax credit and the child care tax credit, along with offering an even bigger break for people who devoted a portion of their tax credit to retirement savings. Additionally, the plan would try to prod CEOs to give their employees raises by changing the rules for companies that claim deductions for executive pay.

Where would all the money come from? For the most part, the rich. Van Hollen is proposing to scrap tax breaks that go disproportionately to the wealthy and to add a new tax on stock trades that he is dubbing "a high roller fee." The latter tax could hit anyone who is active in the stock market, but Van Hollen argues it would only really effect wealthy high-frequency traders. "We must ensure that all Americans who work hard and play by the rules are rewarded with a fair share of a growing economic pie," he said in a speech laying out his plan in Washington.

The plan drew swift endorsements from Nancy Pelosi, the House Democratic leader, and an array of liberal groups, although not yet from the White House. While the tax cut for the middle class should be an easy political sell (Who doesn't want an extra $1,000-2,000?), the more punitive Wall Street policies are significant because they put the Democratic leadership behind ideas that have energized the Elizabeth Warren wing of the party. A group supportive of Warren, the Progressive Change Campaign Committee, applauded Van Hollen for his plan "taxing high-risk Wall Street gambling." "Since Election Day, we've been urging the Democratic Party to rally around big economic populist ideas that impact millions of people's lives," the PCCC said.

Republicans, as expected, trashed the proposal. "Just as the sun rises in the east, Washington Democrats propose another massive tax increase," said Brendan Buck, a spokesman for Representative Paul Ryan, who announced on Monday he would forgo running for president to focus on writing tax policy as chairman of the House Ways and Means Committee. "Here in the House," Buck said, "our focus is going to be on cleaning up the tax code so that we can lower rates for all taxpayers and help create good-paying jobs, not scaring them off with punitive tax hikes."

With the GOP firmly in control of Congress for the next two years, Van Hollen's proposal has no chance of going anywhere immediately. But it lays down a marker for Republicans, who have talked increasingly about wanting to move away from their budget-slashing reputation and toward policies that can win over the prized middle class. And it can also be seen as an offering to Hillary Clinton, who will need a platform to run on in 2016 as well as a way of attracting the liberals who are disappointed that the more populist Warren won't challenge her. So while it won't become law, Van Hollen's plan is likely to help shape the economic debate both in Congress and on the campaign trail.