One of the downfalls of the first Bush Administration was the breaking of his promise not to raise taxes. If you were alive back then, you can likely still remember him looking directly into the camera during his campaign and saying, "Read my lips, no new taxes." That lasted until the first major budget compromise, and after that, the whole thing was forgotten.
Conservatives never forgave him, and so he lost to the upstart saxophone player Bill Clinton.
Well, it appears that President Biden either does not know his history, or believes that the country has changed dramatically enough that he can get away with it. He promised not to raise taxes on any couple making $400k per year or less, which is fine in rural Tennessee, but will be a problem in high cost of living states like California, New York, and Washington. Oh wait, those are the very states who spearheaded his Presidency...
In California, for example, a one room studio apartment can easily rent for $1,200 a month. Add a single bedroom and the price jumps to between $1,600 and $2,000+ per month. McDonald's worker wages, not manager salaries, begin with $2-.-- which means at least $41,740.00 per year. A competent manager will get over $100k and most company leaders will be over the $200k mark.
If two of these $200k earners are married, and by the way, that is just upper middle class for California, they will see income tax increases of up to 11% depending on how they have their money distributed and in which retirement vehicles they are saving.
Oh yes, if it is one person making $200,000 per year, they are also subject to those same taxes. Again, to someone in podunkville, West Virginia, this probably seems incomprehensible, but to someone living in coastland California, Manhattan, New York, or Downtown Seattle, this specter is quite real.
Other big cities could also get hit, though to a lesser degree. Cities like Denver, Dallas, Chicago, Las Vegas, and others could see a higher number of their residents hit with tax increases. Someone living in Boise, Idaho might not care, but someone living in Portland, Oregon might.
Therein lays the trap that Biden is setting for himself and the Democrat party.
High margins of victory in these cities are what propel the Democrats to victory in these states.
Take out LA and San Francisco, California votes solidly Republican. Remove NYC, and the state of NY votes Red. The one exception to the list above is Washington, remove Seattle and it still likely goes blue.
Yet, those high margin victories come because of the Independents, not the actual Democrat voters. It is the independent voters who secure battleground states, not the hard core party-philes. So imagine what 2024 might look like in a second run for Joe Biden (because they are not going to run Harris after her record) when he attempts to court the same independents whom he broke his promise to and raised taxes on...
It might not work out so well for him.
You see, dyed in the wool Democrats and Socialists (but I repeat myself) will not care about the tax increases. They willll rationalize themselves into believing that it is for the common good (yadda yadda) and they will still vote Democrat. Yet those independent voters will remember those promises, and that can cause issues in states like Ohio and Florida, which are key states for Republicans to win the Presidency, and in which the largest cities have costs of living that COULD become problematic for the President's tax promise.
All of this so that he can ram though a $3.5 TRILLION package of redefinition "infrastructure."
By the way, that will also come back to bite him pretty hard.
I mean, we have not even talked about his corporate tax rates which will drive companies back overseas and/or cause drastic job cuts when the market is already facing the looming job shortage when people have to get back to work after COVID.
How will people feel when salaries are slashed so that companies can keep the bottom line up for the shareholders or entire production facilities are closed down because they can simply purchase an import from China for 1/3 the price?
That too will come back to bite Joe Biden hard.
Yes, corporations can absorb some cost increases, but between the higher taxes, the new regulatory cost of COVID compliance, the rising cost of health insurance, and the unavailability of employees for stretches of 14 days or more (leading to a need to overhire), they are going to be unable to take the cost increases and you are going to see a major retraction of the economy.
But hey, at least we are, "stickin' it to the rich."
Well, in case you have not noticed it, the rich never pay it.
The best case scenario is that they stop spending to close the gap between what they want to keep and what they are, which kills economic activity and kills jobs. The worst case scenario, and the far more likely one, is that they find a way to pass these costs on to the rest of us in everything from rent increases to company "corrections" of cost imbalances.
The middle class always pay the tax burden, no matter what the politicians say.
So you had better start looking at some budget cuts of your own and having some type of physical asset protection (hedge) for your portfolio.
Buckle up, this is going to be a really bumpy ride...