20 Leaders The Economist October 30th 2021
the current system. It is this proposal that Mr Manchin rejects.
All these ideas are gimmicky and none is good. A tax on the
book profits of companies would outsource tax rules to unac
countable accounting bodies, reduce the efficacy of desirable tax
deductions for investment and, by interfering with the ability to
carry forward losses, play havoc with firms whose profits are vo
latile. (Will they have to pay the minimum tax in the good years
without recompense in the bad ones?)
There is no sound economic reason for penalising share buy
backs. In any case, firms could avoid the tax attached to them by
paying dividends instead. The “marktomarket” capital gains
tax is a messy attempt to rapidly extract enormous amounts
from a tiny number of the very rich—Elon Musk alone might
owe $40bn55bn. Because this tax would apply only to securities
traded on public markets, with different rules for stakes in pri
vately held firms, it would deter entrepreneurs from floating
their companies on the stock exchange. That would ultimately
be bad for investment and the incentive to innovate, and would
get in the way of the widespread ownership of equities.
Democrats’ predicament might seem like a straightforward
result of their fragile control of Congress and the idiosyncrasies
of two of their senators. But it also results from a lack of vision
and leadership. They have failed to bring in straightforward re
forms that raise revenue by enlarging the tax base, such as abol
ishing the egregious exemption that resets accrued capital gains
to zero when owners die and pass on their estates.
Taxing capital gains at death, as Mr Biden first proposed,
would raise more than $200bn over a decade—not far off the
“several hundred billion” Democrats say the tax on investment
portfolios would yield. Yet lobbyists defeated the idea, just asthey also preserved the carriedinterest loophole, which lets in
vestment managers class their fees as lightly taxed capital gains,
not income. Democrats continue to toy with the idea of lifting
the cap on an exemption from federally taxable income of mon
ey used to pay state and local taxes. Doing that would benefit the
wealthy, narrow the tax base and subsidise hightax states.
In promising to pay for a big expansion of the welfare state by
taxing only the rich, Mr Biden ignored the example of Europe. Its
social spending is funded using broadbased and efficient taxes,
most notably valueadded tax, a levy on consumption. The pres
ident’s plans, which included a big rise in corporate taxes, were
by comparison unfriendly to economic growth to begin with.
Narrowing the target further—the capitalgains reform would
apply only to billionaires and those with more than $100m in
annual income sustained over three years—led to a proposal
which is even more poorly designed, and which Mr Manchin is
right to oppose. All along, Democrats have pretended that rais
ing taxes on businesses would have no negative effect on wages,
contrary to the overwhelming consensus among economists.
The failure to agree on a tax plan carries echoes of doomed
Republican attempts, under Donald Trump, to “repeal and re
place” the Obamacare healthinsurance system. That promise
was also made without enough thought about the economic and
political constraints it was up against.
Perhaps one of the two dissident senators will give ground,
letting Mr Biden’s proposals pass. But sooner or later, Democrats
will have to confront the fact that permanently expanding the
welfare state without damaging the economy means winning an
argument for higher taxes,rather than always telling voters that
some rich person will pay.n“W
e needto strive for genuine gender equality.” So de
clared China’s leader, Xi Jinping, at the unlast year. It is
a cause the Communist Party has long said it cares deeply about.
Mao Zedong once proclaimed that “Women hold up half the sky.”
And China’s women have indeed made progress. The World Eco
nomic Forum places their country below most of the rich world
in terms of equality for women, but well above Japan and India.
However, since Mr Xi took power in
China has fallen from 69th place on that list to
107th. He seems bent on making China more
macho. In September his officials banned ef
feminate men from appearing on television.
His Politburo Standing Committee is still all
male. He stresses the role of women as wives
and mothers. Most important, he has ruthlessly
crushed feminist activism. To him, any organ
ised movement is a potential catalyst for antiparty dissent.
There has been some progress (see China section). The party
has taken steps to remedy a humdrum but nontrivial grievance:
that there are not enough public toilets for women. In 2016 it de
creed that, when building them, there should be at least three
places where women can relieve themselves for every two for
men. Mr Xi’s censors quickly expunge references to #MeToo, butsince that campaign took off in the West in 2017 China has intro
duced new rules aimed at curbing sexual harassment and do
mestic violence.
Even so, the party does not want debate about sexual harass
ment in the workplace. It might implicate too many important
men on the state’s payroll. The very term “sexual harassment” is
often censored. The courts are hearing more cases, but they are
often brought by the harassers, who accuse
their victims of lying. The party gives free rein
to online trolls vilifying women who have com
plained about their abuse.
Mr Xi uses Mao’s “half the sky” quotation,
but—unlike Mao—praises Confucian values
that emphasise women’s roles as carers. It was a
relief to many women when he announced in
2015 that he was relaxing the onechildper
couple policy. It had been a gross violation of women’s freedom
to make their own reproductive choices, and often involved hor
rors such as forced abortions and sterilisations. But couples are
not yet free to choose. Three children is the legal limit for most.
Among ethnicUyghurs in Xinjiang, government efforts to curb
population growth have grown even harsher.
As for women from China’s ethnicHan majority, the governChina says it defends women’s rights. So why attack feminists?Clouds over the sky
Chinese women