It's speculative, but some non-partisan tax specialists have looked over Paul Ryan's budget and have come to the very reasonable conclusion that the only way you can cut taxes on rich people while maintaining budget neutrality is to raise taxes on the middle class (probably the amorphous "upper middle class," that everybody thinks they're part of.
This is a big deal, since Ryan's budget is Mitt Romney's. It gives Obama a chance to campaign on an anti-tax platform. After all, Obama has lowered taxes for everybody throughout his stimulus efforts and Republicans have responded by calling it socialism.
Now, I'm of the mindset that the vast majority of Americans don't have enough money to pay higher federal tax rates than they already do. But I wonder if you all agree. I'd seek to balance budgets on the backs of the very rich by taxing investment income as income for people who make more than $250,000 a year and I would take away their mortgage interest deductions. I would also raise their marginal rates. That's just me.
I wonder what you all think about this $250,000 a year Maginot line that Obama has been using since pretty much day one. This is five times the median income. Are people who make $200,000 rich? Can people who make $150,000 a year afford to pay more in taxes than they do now? $100,000 is still twice the median income in America. As a New Yorker these sub $250,000 a year sums do not seem to me like a lot of money. But, you know, nobody asked me to live in one of the most expensive cities in the country.
Of course, one reason that $100,000 doesn't go far in New York is taxes. We pay city and state taxes. These are deductible from federally taxable income but, there's a catch -- that deduction can actually land you paying the Alternative Minimum Tax, designed to snare the very wealthy. Also, rents are high here and renting doesn't enjoy the tax advantages of ownership, which is actually an argument for either making rent deductible (which would either drive up rents or bankrupt the country) or getting rid of the mortgage interest deduction (which might perversely make home ownership more affordable by driving down values, or might not). Frankly, I'm okay with working people getting a mortgage interest deduction.
These are all discussions we could have, but that we're not having. The default Democratic position right now is that George Bush's tax rates are absolutely perfect for the first $250,000 of any person's annual income. Do you agree with that statement?
I want to believe it's true because I don't want to pay any more in taxes than I have to. But, come on, what's the likelihood that George W. Bush, who got so much wrong, got that part right? The one argument in favor of him getting it right is that the tax cuts that he enacted were small for people under the $250,000 income threshold. That we're talking trivial amounts of money from the Clinton rates to the Bush rates.
Matt Miller, the Washington Post columnist who I pick on when I can tear my attention away from David Brooks and Thomas Friedman at The New York Times, speculated in his book, The Tyranny of Dead Ideas that the "upper middle class" are victims of the current concentration of wealth because of inflation in the costs of things that might be considered perks of having money. It used to be, he said, that a highly paid professional like a doctor or lawyer would have enough money to join a civic board or to help administer the 92nd Street Y or to send their kids to private school or to even buy an apartment and that all of those things are now out of reach because the super rich have bid up the prices. Miller believes this will one day culminate in a revolution of the upper middle class. Not a physical rebellion, of course. But definitely a political one. This is a group of people, he says, who see themselves as being denied their due.
I wonder if this isn't a motivation behind the $250,000 tax hike cutoff. A lot of these people could be termed high income but not affluent. They have cash flow, but not considerable savings. They can lose their jobs and be knocked down a few pegs very quickly. I do not make that much but if I were fired tomorrow I know I would have a hard time replacing my job without giving up wages. So, you have this group of people with money and some influence and low security and a low sense that they're getting the lives they envisioned for themselves. They're competing, basically with the truly affluent and though by most measures in life they're "winning," they look in the mirror and see "struggling." So, there's a lot of anger there.
How much of it is legitimate, though. Are the Democrats making a mistake by indulging this anger? While it would be very funny to see Romney go down in flames because the vast middle thinks he will raise their taxes, I'm not so sure that it's healthy that the Democrats have basically made a protected class out of people who take home salaries that are on a higher order of magnitude than what most of their fellow citizens make.