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Deep in the Heart of Taxes

Wes Clark's receiving a lot of good publicity for his new tax plan. And well he should. It's a good plan that could go a long way toward addressing the Democrats' vulnerabilities on taxes and might prove quite popular with general election voters, who, DR has heard, tend to look favorably on middle class tax cuts.

Clark should also, of course, strengthen his electability case over Howard Dean with Democratic primary voters. Now, he not only has superior national security credentials but also a clear advantage over Dean on the tax issue.

Dean, for his part, seems determined to stick with his Mondale-ian insistence on taking back all the Bush tax cuts and therefore, in effect, raising taxes on the middle class. This is in spite of a boatload of polling evidence showing that, while rescinding all of the Bush tax cuts is quite unpopular--even with Democrats--repealing those for the rich and leaving the middle class tax cuts in place is viewed far more favorably.

Time for Dean to stop being stubborn on this one and embrace the kind of approach Clark is advocating. Middle class tax cuts: try 'em, you'll like 'em! And winding up like Walter Mondale--you wouldn't like that at all.

Comments

Ruy:

Is this good enough for a signature domestic issue? My gut says yes.

What are the implications of eliminating huge numbers of Americans from the tax rolls entirely? Something for nothing, I'm sure. It's very dangerous to pass out all the goodies of civil life without expecting any contribution whatsoever in return, especially as far as middle income people are concerned. All I see here is another 'painless' pander - goodies for votes, and, in the end, no progress toward solving any of our existing problems in education, healthcare, etc. Sounds an awful lot like Bush to me. (And, please note that, as usual, people with no dependents get screwed again!)

I pray that Dean knows he has to reposition on taxes. If he is as smart politically as he seems, he will. If he is indeed the nominee, that is.....I think that's less certain than today's CW. We'll know on Feb 3rd. Actually, if Clark finishes within 5 points of Dean in NH, that would be huge. Within 8 or 9 points would still be very good and set him up for winning 3 states on the 3rd.

Taxes are very, very important, more so than its treatment in the Dem primary would indicate.

Christ! Paying people $200 to vote for you is probably popular, too, and with $200 mil being spent on the election and less than 1 million swing voters, it's also entirely possible. At what point does pandering become bribery?

This is a tremendous move on Clark's part - it's good policy and good politics. It gives Clark a tax policy that is at once the most liberal and the most appealing to swing voters who vote their pocketbooks, and it also avoids raising the deficit. A hat trick for Clark! Clark needs to counter the lingering suspicion that liberals have for military people, and having the most progressive (in both senses) policy on taxes should go a long way. Dean is now outflanked on this issue and has to think long and hard about how his tax-raising vow will play in the low-tax states of the south and west.
The other very good thing about this is that it works well in the general election. If the democratic nominee has a plan that cuts taxes and doesn't increase deficits at the same time then Bush's signature issue might be stolen from him.

Another "free lunch"! The hope of people actually learning grows more remote by the hour.

Although I am not rich, I am intellectually honest enough to recognize that you can't merely "soak" the rich any more than you can give them a "pass".

It's always SO easy to let the other guy pull the cart. My God, what a crappy country.

Clark's proposal is a huge step in the right direction, not only because it shifts the tax burden to those who are more able to pay, but also because it offers tax simplification. In 2000 Gore had a huge menu of tax cuts, breaks, increases, and rollbacks --- it was impossible to understand, and Bush exploited that.

One of the strengths of the Clark campaign has been its ability to put out messages that are simple and to the point. I think this tax plan exemplifies that.

Sean,

Pharmecuticals, health care, oil & gas, and other industries are paying even bigger money to have the Bushies craft legislature to their specific benefit. Is that closer to bribery than pandering?

Ellie,

At one time you were a dependent. Someone single, or unable to bear children was helping your parents "carry your weight." The concept of generational responsibility is couched in history, crosses cultures and oceans, and helps form a sense of responsibility (not optional) in society. If you fear taking care of other people's children with a few of your dollars each tax year will significantly affect the quality of your retirement, I suggest you save more.

I agree that this is a political masterstroke. Not only that, but Clark's "bring Karl on" dare during the announcement was brilliant. As a Dean supporter, I can only sit here in my corner and glare with envy.

But while I'm doing that, I'll also share my qualms about this proposal as a policy. It's revenue-neutral, folks! In other words, it does nothing to erase the deficit. Nothing at all.

It also does nothing to move the debate off the rhetorical playing field that the Republicans have set up. On their field, taxes are always onerous, always bad, always burdensome -- therefore, we all need "tax relief." When, oh when, are we going to get someone (maybe not someone in the middle of a presidential run, but someone) who will make the case that taxes are the price we pay, as adults, for having a society that functions and is maybe a little bit just? When will we get someone who will stand up to the GOP demagoguery on this issue, rather than maneuver around it?

But again, hats off to the Clark team, and if it helps him win the nom, I'll happily work my butt off for him.

You've been calling Dean on this for a long time, Ruy, and I think you've been right to do so. It appears now that Dean's going to have a tax cut, something I've been waiting for a long time. I think it's going to come in the form of a reform of payroll taxes: a cut in contributions for lower and middle incomes and an increase in the ceiling on contributions for the higher end. I've posted the link to a couple of news stories at JUSIPER.

Patrick -

Thanks for the news about Dean's movement. Sounds like a step in the right direction, but just a step. As currently framed, his proposal will be complicated enough that most Americans won't be able to understand it and the Bush campaign will be able to paint it as a tax increase. "Raise everyone's taxes, cut the payroll tax that no even sees on their pay stub, raise the social security tax limit..." Hmmm, what's going on? Sounds like the Democrats want to raise my taxes again.

It's the tax simplification, stupid.

I agree that if Dean cannot do a better job explaining why the entire tax package should be repealed, he needs to go toward a Clark style plan. Politically it might be just too hard to sell a full repeal. But this is so frustrating for me, because as a matter of policy and principle it is so obvious we need all the tax cuts to go in order to raise sufficient funds for responsible government and debt reduction:

1. most importantly, repealing only the top rate on those making $200,000 a year will not raise very much money. No one wants to admit this, because it somewhat undercuts the idea that the Bush tax cuts benefit only the rich. My understanding, from taking to the staff of a Congressman who has intorduced legislation to repeal the top rate cut only, is that such a move would raise only about $100 billion over 10 years. So we are supposed to make a big deal about how outrageous the May 2001 $1.4 trillion tax cut was, but we are not supposed to support retaining $1.3 trillion (over 90 percent) of those cuts?! I suppose canceling the estate tax cut would add a little more. Still, not much! Fact is, most of the $1.4 trillion comes from upper middle class people, who received extremely modest tax reductions that add up overall because of the large numbers of people who receive them.

2. baby boomers, who are going to be a tremendous fiscal burden in the years to come as they retire, are in a position now, and have a moral obligation in my view, to reduce that future burden as much as possible by paying today a greater share of taxes. This in turn would allow us to pay down the debt and responsibly fund smart government instead of incurring ADDITIONAL DEBT for future generations. A smart politician like McCain could (and has, in his floor statements given around votes against passing further cuts) framed this as a patriotic, national sacrifice issue. Its funny how Repubs want to shield the rich from all civic obligations, while Dems seem to want to shield everybody else from those obligations. How uninspiring.

3. What has been needed in 2001 and 2002 are even larger short term cuts, even bigger than the ones we had, which would have gotten us out of recession quicker. The long-term cuts that passed in May 2001 were based on entirely fictitious and absurd economic projections based on the high tech stock bubble continuing indefinately. They would not have passed if Gore had won. They did not take into account 9/11 and aftermath.

WHY ISN'T DEAN, or someone like the writers at the New Republic for good sake, MAKING THESE POINTS?

It makes me sick to see bad policy being put forward by smart people.

Good point, alms. Too bad Dean's dug himself into somewhat of a hole on this issue. If he can climb out of it and look good in the process, it'll be quite a feat.

I keep thinking that whoever wins the presidency - Bush or a Dem - is going to have some mighty tough calls to make, given the monster deficit.

I agree that Clark actually seems to have yanked the rug out from under Dean here.

The only chance Dean has to change position would be to say that he wants to immediately revert to the Clinton tax rates but would look to slowly phase in a tax simplification scheme that would not be a shock to the economic system.

Why I like Dean's pitch - even if it is less exciting to voters at this moment - is that, over the long term, his repudiation of trickle down economics is nothing but good for the party. For some reason, Democrats have abjectly failed to really challenge supply-side economics for two decades. It is amazing to me that George Bush pere was able to succinctly label Reaganomics "voodoo economics" in 1980, but in the past 20+ years Democrats have largely attacked supply-siders on grounds of fairness not effectiveness.

Go Wes! I note with approval that yesterday's Gallup poll shows a strong Clark surge.

The one thing that seriously worries me about a Dean candidacy is this middle-class tax cut issue. About a year & a half ago Kerry was all set to suggest a "Democratic tax cut plan". That would have been a middle-class tax cut, but W stole his (our!) thunder. The middle class is not responsible for the humongous debt piled up since Reagan, so I don't believe that fiscal responsibility should mean repealing the M-C tax cut.

BTW, why don't we ever dicuss the 12%-20% of the Federal Budget that goes to national debt interest payments every year??? This is where the Reagan fiscal irresponsibility is still costing us, just like all us donkeys were predicting more than 20 years agon now...

I believe Dean always wanted a middle class package but wants to wait until the general to announce it. That said, I think Clark's got a better tax package for the time being. I am not sure how it affords to pay for the things that Dean wants to implement that I support, though.

Reading clark's tax plan, I'm not able to figure out if my taxes - single, no children - will increase.

I think Dean's idea (which he's abstractly favored in the past and which I predict he'll use) of removing the upper limit of the payroll limit, and raising the lower limit so that many workers wouldn't pay it at all, would be superior to Clark's.

Sebastian,

When I was a 'dependent' my parents were forking over a rather considerable portion of their income in taxes because the rates were much higher then. My point as regards people with no dependents is simple - as a minority, the goodies never come our way. I presently pay thousands of dollars a year to educate other people's children - so much money, in fact, that MY retirement is endangered. I could 'save more', IF state and federal taxes weren't eating a third of my income. In any case, my point is bigger than personal concerns: money doesn't grow on trees. I'd love something for nothing, but it ain't gonna happen. We're encouraging the idea that the government can do 'more' while simultaneously promising lowered obligations for millions and millions of citizens. That will foster a sense of entitlement that will ultimately be detrimental to the standard of living for all of us. Democrats are supposedly the 'responsible' ones as far as the deficit is concerned.

Anyone care to defend retaining the 2001 and 2003 tax cuts on principle or policy grounds, rather than political ones?

we can expect half trillion dollar yearly deficits for as far as the eye can see, and the impending retirement of baby boomers in just a few years. We have 45 million uninusured, a war in iraq running toward the quarter trillion mark, and an unfunded No Child Left Behind Act.

The 2001 cuts amount to $1.4 trillion and the 2003 cuts are another $350 billion. Scaling back cuts only for the wealthy returns only a small fraction of this revenue.

Unless you believe government is a beast that needs to be starved, and that the impending retirement of boomers is a great opportunity to "modernize" social security and medicare -- I see no policy justification for retaining any portion of the 2001 and 2003 cuts.

RE: "Anyone care to defend retaining the 2001 and 2003 tax cuts on principle or policy grounds, rather than political ones?"

Ever since the Reagan administration started to agitate for tax cuts 23 years ago, the tax structure in this country has become less and less progressive. (I will give credit to Congress, and even Republicans, for closing many tax loopholes in the eighties.) After more than 20 years of talking about taxes, the last tax cut was the first time that the middle class saw any significant reduction. If we want to reduce the deficit and begin to pay down the national debt, I personally think the money should come from those better able to afford it, namely individuals making over, say, $150k a year, and from all of those corporations who still take advantage of (completely legal) loopholes to reduce their taxes to pratically zero. Letting the middle class keep their tax cut is both good politics and good public policy.