My name is Holli Woodings, and I’m the Vice President of Government Affairs here at Patriotic Millionaires where I oversee our legislative, policy, and political work. Previously I’ve served as the President of Boise City Council, as a State Representative in the Idaho Legislature, and as a Senior Fellow at the National Institute for Civil Discourse here in Washington, DC. In addition, I’ve worked to elect excellent leaders up and down the ballot. My focus has spanned issues from Pell Grants to homelessness, from voting rights to renewable energy. But now, I get to work in the issue area that underpins all others: money and taxes.
We usually write our weekly Closer Look newsletter in the collective voice of our millionaire members, “class traitors” who I’ve grown to greatly admire in my time here. This week though, I decided to take the pen to set the record straight on some key aspects related to a proposal we’ve spent over a year launching into the world: the Working Americans’ Tax Cut Act (WATCA).
Due to the incredible work of our team and many others, WATCA was introduced on March 12th by Senators Chris Van Hollen (MD), Senator Mark Kelly (AZ), Representative Don Beyer (VA-08), and a number of their congressional colleagues. It’s the second part of the Patriotic Millionaires’ very own legislative platform, the one that compelled me to work here, The MONEY Agenda. In a nutshell, WATCA eliminates federal income taxes for individuals making less than the median cost of living in America for a single adult with no children (approximately $46,000 a year). Following the existing tax code, it would give more relief to married couples filing jointly and heads of household, and also provides modest relief for households up to 175% of the median. Lost revenues are made up through a modest graduated surtax on annual incomes over $1 million.
Since its introduction, WATCA has generated significant interest from the press, political pundits, and tax experts. Much of the attention has been positive, but as with any legislative proposal, we’ve also come up against some criticism of the bill. To be clear, discourse is healthy when a new idea enters the public sphere. Everything should be put through the ringer before it becomes an actual law that impacts the lives of Americans. And in the spirit of discourse, I have listed out the four most common misconceptions we’ve run into about WATCA and offered responses to each of them. Through this exercise, I hope I can help everyone—whether they’re one of my fellow tax enthusiasts, a member of the press, or merely an interested voter—appreciate the good that WATCA can do in helping to ease the financial pain being felt by millions of Americans around the country.
Misconception 1: WATCA is a middle-class tax cut.
I want to tackle this one first, and I’ll make it brief. In press hit after press hit, we have seen WATCA referred to as a middle-class tax cut. It is not. It is, in short, a tax cut intended for any and all Americans struggling to afford their basic needs.
What constitutes being “middle class” in America these days is certainly subjective. But I think we can all agree that the millions of households that can’t (or can barely) afford essentials like rent, food, healthcare, and childcare—i.e. the primary targets of the proposal—are not living a white-picket-fence, middle-class American Dream. They’re retail associates, home health aides, and childcare providers. They’re in low-wage jobs and rightly feel that this economy, one in which they’re working full time yet unable to pay for the necessities of life, is rigged against them.
If anyone needs a shorthand for WATCA, instead of calling it a middle-class tax cut, we recommend calling it an “affordability tax cut, paid for by millionaires.”
Misconception 2: WATCA is regressive. It gives more tax relief to people that earn more, and doesn’t provide support to the worst off.
For those earning below WATCA’s cost of living exemption, it is true that people making closer to the exemption threshold would receive larger tax cuts. For example, a single person making $46,000 would see a bigger tax cut than a single person earning $20,000. But we wouldn’t go so far as to call this regressive. In the end, both parties are getting a 100% income tax cut, and tax cuts can’t exceed 100%.
For single taxpayers, the greatest benefit from WATCA goes to those earning $46,000 per year. But beyond that, the benefits steeply drop. For a single person with income of $64,000 or more (still not middle class), the tax reduction from WATCA would be roughly $1,100, or 40% less than the $46,000 taxpayer. The Yale Budget Lab also found that the top quintile of earners would see an average 2% decrease in after-tax income—with the top 0.1% alone seeing a 12% dip—thanks to WATCA’s surtax. That’s not regressive to us.
It’s important to bear in mind that many of the poorest households in America make so little that they don’t have income tax liability to begin with. Given that WATCA focuses on income tax, by definition, the proposal would not help them. But that doesn’t mean it’s bad policy.
The poorest Americans should absolutely receive targeted tax relief. And thankfully, they already do, through important programs like the refundable portion of the Child Tax Credit (CTC) and the Earned Income Tax Credit (EITC). But millions of Americans without eligible children to qualify for the CTC, or who make too much to qualify for the EITC, are also struggling with the current affordability crisis. As mentioned, the estimated median cost of living for a single adult with no children in America is $46,000. 54 million Americans—or 37% of the workforce—make less than that. Meanwhile, the maximum income that’s eligible for the EITC is $19,104 for a single filer with no children. Suffice it is to say, there are millions of Americans who make between $19,104 and $46,000 and need help. WATCA would provide that help.
As a rule, just because some households are struggling comparatively less than others doesn’t mean that public policy shouldn’t address their needs. We should naturally help homeless people, and also those who have to work three jobs to afford a studio apartment. You shouldn’t have to be at the very bottom to qualify for help—and certainly not in the richest country in the history of the world. While we quibble over a policy that costs $0 per year and helps 130 million Americans, the 132,000 American households that control $22 trillion in wealth and sometimes pay $0 in federal income taxes are laughing at us from their high horses. Which is a great segue…
Misconception 3: Having a large segment of the population not pay income tax is unfair. It’s only right that everyone has “skin in the game” when it comes to paying federal taxes, even if some pay a smaller share. It also would hollow out the tax base that we need to finance other social priorities.
Let me first make clear that, even when WATCA passes, every resident of the United States will still pay federal taxes, even if they no longer have income tax liability. Americans pay a host of federal taxes beyond income taxes, such as payroll taxes that fund Social Security and Medicare, excise taxes on things like gas, plane tickets, alcohol, and tobacco, and tariffs. The impact of these other taxes is also regressive, because they take a proportionally larger share of income from low- and middle-income households than from higher-income ones. All this to say, if WATCA passes and 130 million Americans get federal income tax relief, they will still have plenty of “skin in the game” in the federal tax system.
If anyone in America needs more “skin in the game” when it comes to paying taxes, it’s rich people like our millionaire members, not working people. Elon Musk is within shouting distance of becoming a trillionaire, thanks in large part to the billions he’s received in government subsidies over the years. And yet, because of the way our tax code is structured, he can literally get away with paying nothing in income taxes. This is not an accident, or an inevitability. Wealthy Americans, over many decades, have used their money and power to create a tax system to benefit themselves and dig deeper into the pockets of working people. And we think that’s wrong.
Which leads me to the tax base concern. To be clear, the federal government will never be at a loss for revenue to spend on social programs for the simple reason that it issues the currency that we all use. But that’s a story for another day. For now, we’ll just say that millionaires and billionaires are so rich, and the possibilities for raising revenue from their fortunes are so many, that there is no reason to be concerned about hollowing out the tax base by eliminating millions of Americans’ income tax liability through WATCA. We’ll be fine, so long as lawmakers find the political will to properly tax the rich. (At the press conference introducing the bill, Senator Van Hollen himself admitted that we need to go further than WATCA’s surtax on high earners to ensure the wealthy pay their fair share in taxes.)
Misconception 4: A tax cut is not going to solve the affordability crisis. A better way to do it would be to strengthen the social safety net and make things like childcare, healthcare, and education more affordable.
For the record, no one said that WATCA could singlehandedly solve the affordability crisis, nor was it intended to do that. I can’t think of any single piece of legislation that would.
We don’t disagree that strengthening the social safety net is a great route to take in making life more affordable for Americans. In fact, we’d add that an equally, if not more, important route to take is to ensure workers’ wages track properly with inflation, GDP, and the rising cost of living. (We say as much with the other components of our MONEY Agenda.) But until that day comes, allowing people to keep more of their hard-earned money by eliminating their income tax liability will go a long way in helping them afford their basic needs. And if 59% of the country says that their federal income taxes are too high, we can’t help but think they’ll be on board with WATCA.
But there’s more to WATCA than helping, if only a little bit, to solve the affordability crisis. It’s about a principle: In a country as rich as the United States, federal income tax revenue should not be held up by people who are struggling to make rent while the very wealthy pay zero. People should not be pushed into, or further into, poverty by their federal income tax bills. We’ll stand by this moral imperative even when prices for essentials come down, the social safety net is stronger, wages are sufficient, and the affordability crisis is finally in America’s rearview mirror.
Conclusion
Though I now work alongside some of the wealthiest Americans, I’ll never forget where I came from. When I think of the hardworking people who will benefit from WATCA, I think of my family members, who work with their hands and on their feet. I’m frankly infuriated to know that many work full time, pay $2,500 a year in federal income tax, but are struggling to pay rent, let alone save to buy a home. Meanwhile, we have members who follow all the tax laws of the land, live comfortable and luxurious lives, but still pay $0 in federal income taxes. I don’t resent our members; I resent the system. And it’s no wonder that my family members have lost faith in democracy and their elected leaders, so much so that some have stopped voting at all.
That’s what drives me to do the work I do at Patriotic Millionaires. We have a chance to correct the errors of the past and build an economic system that works for a vast majority of Americans. The Working Americans’ Tax Cut Act is just one piece of that, what Senator Van Hollen called “tent pole” idea that gives real relief to folks struggling to make ends meet. We need all the good ideas out in the public arena for debate, so when the time comes for a governing moment, our leaders are ready with vetted policies that reward work over wealth, and tax the rich.