Democrats are increasingly abandoning their biggest talking point on taxes: Families earning more than $250,000 a year are “wealthy” and should pay more.
That figure – $250,000 for a household – has been at the tip of the tongue of so many Democratic candidates and lawmakers in the past few elections that it’s become ingrained in the party’s tax philosophy. But they’ve taken a beating from Republicans and have grown increasingly divided on the issue, since that income level would not only cause tax increases for some small businesses but also hit upper-middle-class suburban voters in swing states.
So Democrats on Capitol Hill and the White House are settling on an easier sales pitch: Tax the millionaires, believing that public opinion is firmly on their side that the truly rich should pony up more cash as the economy struggles and the national debt continues to grow. The new rhetoric could force a serious rethinking of the Democratic approach toward the Bush-era tax cuts for high earners that they’ve vilified for the past decade, lawmakers said Wednesday.
As they gear up for this fall’s fight over the economy and deficit reduction, Democrats think that “drawing the line at $1 million is the right thing to do,” said Sen. Chuck Schumer (D-N.Y.), a chief advocate of the effort.
“In the eyes of many, it is hard to ask more of households making $250,000 or $300,000 a year,” he said Wednesday. “In large parts of the country, that kind of income does not get you a big home or lots of vacations or anything else that is associated with wealth. It also would affect too many small businesses.”
“We need to try to find bipartisan support, and I think there’s a greater likelihood of that if we [tax] income in excess at $1 million,” said Sen. Tom Carper (D-Del.).
Added liberal California Sen. Barbara Boxer of the Democrats’ latest proposal: “I think we feel millionaires – that’s the fairest way to go.”
The latest sign of this evolution came Wednesday morning, when Senate Majority Leader Harry Reid (D-Nev.) and his top lieutenants modified the president’s jobs plan to include a 5.6 percent surtax on those earning more than $1 million to pay for the $447 billion program. One of the major objections in the president’s initial plan was his proposal to limit deductions for those earning more than $250,000.
Briefing reporters Wednesday, House Minority Whip Steny Hoyer of Maryland acknowledged that “some of our members may like [the new Senate] alternative better.”
But Republicans scoffed at the plan.
“None of that is pro-jobs,” said Sen. Rob Portman (R-Ohio), who is on the 12-member deficit-reduction supercommittee. “Increasing taxes would be bad for economic growth – that doesn’t sounds like a jobs bill to me.”
Democrats say it would add fairness to a skewed Tax Code – and the president has shifted his rhetoric as well.
When he unveiled his deficit-reduction plan last month, President Barack Obama took a similar populist approach, proposing what he called the “Buffett rule” to tax millionaires and billionaires at a higher rate, named after wealthy investor Warren Buffett, who famously complained that his secretary’s tax rate is higher than his. And that came a few months after Senate Democrats on the Budget Committee offered an outline calling for a surtax on that income group.
In a sense, the push for a higher threshold is a sign of Schumer’s growing influence over the Democrats’ political tactics – especially since it was the White House that balked last fall at the New Yorker’s call to target millionaires because of its concerns that billions of dollars in potential new revenue would be lost.
Sen. Kent Conrad (D-N.D.), chairman of the Budget Committee, acknowledged the party’s shift away from the $250,000 level, saying setting the level at $1 million makes sense because “we have a situation of people in that category [who,] on average, … are paying less of an effective tax rate than people who work for a living.”
At the White House on Wednesday, spokesman Jay Carney said the Obama administration is not backing away from calls to end the Bush-era tax cuts for those making more than $250,000, saying that the Buffett rule is just a principle for tax reform.
“This president supports the expiration of the Bush tax cuts for the highest-income earners, those making more than $250,000,” Carney said Wednesday. “That has not changed, full stop. He also supports tax reform that would as a guiding principle contain with it the Buffett rule. These – and those things – co-exist happily, as does the Senate approach to this. One does not cancel out the other.”
But if the White House reengages in an election-year fight over the $250,000 level, the president may have to deal with growing divisions in the Democratic ranks.
Indeed, Sen. Joe Lieberman (I-Conn.) voted last December against Obama’s plan to allow the Bush-era tax cuts to expire on those making more than $250,000 and Schumer’s plan to set the threshold at $1 million. But he said he’d support setting the level at $1 million now as part of a broader deficit agreement.
“I think it feels more defensible,” he said. “While $250,000 is a lot a year too, there are a lot of people in the country who feel like they’re still middle class at that point.”
But Lieberman told POLITICO that he opposes Obama’s jobs plan – even with the changes – because he’s “skeptical” that the $447 billion in new spending and tax incentives will actually create jobs, adding that the revenue increases should be used to pay down the debt instead.
“The question I’m asking myself about the jobs act is whether the result of it will be worth spending a half-trillion dollars on,” Lieberman said, adding that he’d vote for procedural efforts to allow the debate to begin.
In anticipation of the Senate debate, the Congressional Budget Office late Wednesday released its $175 billion 10-year estimate for the direct spending costs generated by the jobs bill, which includes assistance to unemployed workers, highway and transportation projects, and aid to states to protect against further layoffs of teachers. The overwhelming portion, as spelled out by the CBO in a letter to Reid, would be concentrated in the first five years including $50.3 billion in 2012 and $59.8 billion in 2013.
But to pay for the plan, couples whose taxable income before deductions is more than $1 million would be hit with a 5.6 percent surtax over 10 years, and it would take effect in 2013.
It’s not hard to understand why Democrats are taking that approach. A recent CBS poll found that 64 percent of the public believes millionaires should pay more in taxes, with 83 percent of Democrats, 65 percent of independents and 40 percent of Republicans backing such an approach.
“I think there’s more of a debate” over setting the limit at $250,000, said Sen. Debbie Stabenow (D-Mich.), who is up for reelection, referring to the dynamics in the Democratic Caucus.
“Obviously, in some parts of the country, it hits people differently,” said Democratic Sen. Sherrod Brown, who also faces a tough reelection in the swing state of Ohio. “I’m fine either [setting the level at $250,000 or $1 million], but some aren’t – and I’m fine with that.”