Little more than a year ago, Democrats in Congress were hesitant to raise taxes on the wealthy. In the Senate, they could not find enough support for boosting taxes on people making $1 million or more a year, much less on families making $250,000. The pre-2010 House, which had a Democratic majority, barely approved higher rates on investment income.
But after a year in which a tea-party-driven Republican Party proposed steep cuts to Medicare and other mainstays of the federal government, polls show that voters have reacted in part by taking a second look at the alternative: tapping corporations and non-earned income as a way to begin balancing the nation’s debt-ridden books.
Congressional Democrats, more liberal since the 2010 elections thinned out moderates’ ranks, are embracing the populist agenda President Obama outlined in his State of the Union speech. Senate Majority Leader Harry Reid of Nevada is planning votes all spring and summer in an attempt to end the tax breaks that corporations and wealthy individuals like Republican presidential nominee Mitt Romney enjoy.
With the House controlled by Republicans, none of Obama’s tax measures is expected to become law. But the Democrats are etching a sharp contrast with GOP initiatives on Capitol Hill, as Republicans continue to emphasize last year’s proposals to change Medicare, cut regulations and develop the controversial Keystone XL oil pipeline.
“We’re going to have a robust debate about whose vision is more promising for moving this country forward,” Obama told House Democrats at their annual retreat Friday in Cambridge, Md.
Nothing against the wealthy, the president added — “Everybody wants to be rich.”
“The question is how do we pay for that?” Obama said about the costs of keeping those tax breaks in place. “Because when you give me a tax break that I don’t need and the country can’t afford, two things happen: Either the deficit increases or, alternatively, somebody else has to pay the tab — that senior, or that student, or that family who’s struggling to make ends meet.”
Democrats would prefer to frame this election as a choice between the two parties, using these kinds of contrasts, rather than, as Republicans position the campaign, a referendum on Obama’s policies.
Although the economy has shown signs of an uptick and the president’s approval ratings have begun to climb from their lows, Republicans believe Americans do not want to engage in this type of “class warfare,” as they call it.
Congressional Republicans are expected to counter Obama’s populist message with their own tax proposals to overhaul the system. They want lower rates for corporations and households — or at least a continuation of the George W. Bush-era tax breaks for all Americans, including those at the upper end of the income scale, which are due to expire in December.
“The Democrats’ addiction to higher taxes, more spending and bigger government represents a defining difference between the two political parties in this election,” said Brian Walsh, communications director for the National Republican Senatorial Committee. “In every Senate race across the country, the choice will be clear between a liberal Democrat who has rubber-stamped President Obama’s failed economic agenda, and a common-sense Republican candidate who will be a check and balance to that agenda.”
Political analysts say the GOP will have the tougher argument to make, however, especially if Romney secures the nomination. He is one of the wealthiest presidential candidates in recent history, and he has personally benefited from the tax code — paying a rate of less than 14% in 2010.
Cutting spending still matters, polls show, but Americans don’t mind asking wealthier households to pay more — a sentiment Democrats rallied around as a way to fund Obama’s jobs initiatives.
“I don’t know that Democrats have a problem here. Republicans might,” said Jennifer Duffy, an analyst at the nonpartisan Cook Political Report. She warns that the GOP’s intent to keep tax rates low for the wealthy appeals to a narrower slice of mainly conservative, tea-party-type voters than the broader electorate the Republicans need to maintain control of the House and win a majority in the Senate.
“There’s not a lot of sympathy in this world right now for hedge fund managers,” Duffy said. Most voters are OK with higher taxes “because it doesn’t touch them. They don’t even dream about money like that.”