Say It Ain’t So on Taxes, Joe Manchin

Oil is $111 a barrel and could go higher. A tax increase is the last thing the economy needs

WSJ editorial.

"Joe Manchin has saved the country from a lot of bad policy in the last year, but Democratic leaders are still desperate to sign him up for a big tax and spending increase before the November election. On Wednesday the West Virginia Democrat opened the door to negotiating such a deal, and the timing would be as bad as the policy.

President Biden used the State of the Union address to suggest new concern about inflation and the budget deficit, two of Mr. Manchin’s main issues. “My plan will not only lower costs and give families a fair shot, it will lower the deficit,” Mr. Biden said Tuesday, in an attempt to rebrand his Build Back Better plan. That disingenuous line was aimed squarely at Mr. Manchin.

The Senator replied Wednesday by shooting down the grandiose BBB plan again, but he said he’s willing to look at a smaller tax-and-spending plan. He said he’d consider a package that raised taxes and imposed price controls on drugs, with half of the proceeds going to deficit reduction and half to spending more for green-energy subsidies.

Mr. Manchin voted against the 2017 Trump tax reform, and he has said he wants to make the tax code more “progressive.” How he’d do that would be harder than he thinks. Raising the corporate tax rate wouldn’t hurt CEOs, who would pass the burden to employees, customers or shareholders. As an extensive body of tax research shows, the big losers from higher corporate rates are workers, who inevitably earn less. 

An increase in individual tax rates would make the tax code superficially more progressive, though it’s hard to squeeze more money from the rich than Washington already does. The top 1% of earners pay some 39% of federal income taxes, and the top 5% pay nearly 60%. Add the high tax rates in states such as California or New York to the federal rate, and the top marginal rate is more than 50%.

Another big problem now would be the economic risk. Vladimir Putin’s invasion of Ukraine and the West’s sanctions on Russia in response have raised economic uncertainty. The economy is still growing, but oil at $111 a barrel already feels like a tax increase and J.P. Morgan says it could go to $185 if Russia’s oil exports continue to be disrupted. A tax increase now would also hit as the Federal Reserve is raising interest rates to control inflation.

Senator, save the country again by calling the whole thing off."