You are using an outdated browser.
Please upgrade your browser
and improve your visit to our site.
Skip Navigation

Has The Tide Turned On Taxes?

Tax Day 2009 was a very steamy affair. As you may recall, tempers got so hot at several anti-tax Tea Party protests in Texas that the Lone Star governor who was riling up the crowds, one Rick Perry, declared that he might just be open to his great state seceding from the union.

Just three years later, Tax Day 2012 has now passed in decidedly quieter fashion. Oh, there was the predictable flurry of partisan press releases, and the Wall Street Journal set aside half of its op-ed page for Grover Norquist (is this an annual tradition, like the stirring account of the settlement of Plymouth Colony that the newspaper runs as its lead editorial every Thanksgiving?) But it’s worth stepping back for a moment at the day’s close for a quick assessment of the state of the tax debate. Because it certainly seems like things have shifted pretty substantially since those secessionary days of 2009.

Not that the policy context has shifted—that’s been the sad joke all along, how untethered the rhetoric was from what has happening, or even what was being threatened. The anti-tax cries in 2009 came at a time of historically low tax rates, when the new liberal Democratic president was vowing to...not raise taxes one jot for families earning less than $250,000, and was in fact presiding over a stimulus package that was returning families up to $800 in the form of a payroll tax credit. And lo and behold, three years later, taxes have not budged—and people are still getting a payroll tax credit. Oh, sure, there’s been the stuff at the margins—the excise tax on very high-priced health plans (which won’t kick in until late this decade), the increase in the Medicare payroll tax for wealthy taxpayers...but it hasn’t left the doomsayers much to work with. Look what poor Norquist had to settle for in his Journal column:

Barack Obama’s promise to tax only the rich in the 2008 campaign had a shorter shelf life: He signed his first tax increase 16 days into the presidency—on cigarette smokers, a group whose average annual income is $40,000. One year later, ObamaCare imposed at least seven new or higher taxes that directly hit middle-income Americans—including the individual mandate excise tax, the “medicine cabinet tax” on health savings and flexible spending accounts, and even an indoor-tanning tax.

An indoor-tanning tax! Aux barricades, citoyens—revolutions are great for getting some un-taxed sun!

Mitt Romney, meanwhile, was left with having to make his dire declaration about Obama’s tax-hiking into a prospective warning. No, tax rates aren’t soaring now, but they will, trumpeted his official Tax Day news release: “If Americans think today’s tax day is painful, just wait until a second Obama term. With more than half a trillion dollars in Obama tax hikes already set to hit the economy in 2013, President Obama wants to add trillions more in higher taxes.”

But here’s the thing: Americans don’t seem to think that tax day is all that “painful”: Gallup shows that the rate of Americans who regard the level of taxes they pay as “fair” has ticked up to 59 percent, after sliding down during the Tea Party years of 2009, 2010 and 2011. And while it’s true that the Bush tax cuts are set to expire at the end of this year, the threat of that increase—which is more real than any tax increase the crowds were facing in the spring of 2009—is not stoking much visible anti-tax ire. Instead, it’s the tax-hikers that are on the march. Yes, they’re mostly still limiting their proposals to the well-to-do, as Obama’s done from the start. But they’re being more free-wheeling about it than they’ve been in years, disregarding Norquist’s warning that any tax increases on the wealthy will be rejected by middle class voters who know that all tax increases eventually “trickle down” to them. These past few days, it’s been hard to keep track of all the different super-wealthy types arguing, pleading for higher taxes on their ilk—among others, there was hedge funder Whitney Tilson on the Washington Post op-ed page a few days ago, and Wall Streeter David Levine on Ezra Klein’s blog today. Heck, there was even a call for higher taxes at one Romney’s events today—a Pennsylvania picnic he held with reg’lar Americans, one of whom told him, “None of us like to pay more taxes, but sometimes that’s necessary.”

What’s going on here? I’m curious what you think. I suppose one could credit Warren Buffett and his secretary; or the president, who has become far more forceful on this front long after he should have, his party’s dismal wipe-out in the 2010 election when voters told exit pollsters that they were in favor of increasing taxes on the wealthy and yet voted, by decisive margins, for the party whose priority it was to oppose such increases. By finding his voice on the matter of tax fairness, Obama has, if nothing else, clarified the who’s-on-who’s-side lines that became so blurred in the midterm morass.

But me, I’m inclined to give a lot of the credit to Willard Mitt Romney. Champions of raising taxes on the wealthy could not have asked for a better emblem of their cause than a quarter-billionaire who made his money slicing and dicing companies and now pays less than 15 percent on an investment-fueled income of $20 million or more per year—and who, unlike Buffett et al, is proposing tax rates that would lower his own bill even further. Romney knows this, which is why he’s been so remarkably squirrelly about releasing his own tax returns (seriously, how much did it undermine Romney’s tax-day message that he himself sought an extension for this year’s taxes, so as to delay the moment of revelation?)

The evolving tax debate is bearing out what I argued in a cover story for the magazine in January—that Romney's wealth, per se, would not be as easy a target for the Obama campaign as some liberals like to assume, but that his tax rate would be an easier mark:

Given all this, it’s worth noting that, among the voters I spoke to, even some of those inclined to give Romney a pass for his business background came up short on one issue: taxes. It was wrong, they said, that Romney had paid no more than 15 percent on his fortune, thanks to the lower rates for capital gains and private-equity income. “That does bother me. Everyone should have to pay their fair share,” [Anne] Field said. Echoed [Randy] Lavallee: “That bothers me, because I think that people that earn more ... should pay the taxes just like you and I would have to do.”
This fits with polling data. Shortly before releasing its survey showing the sharp split on Americans’ view of wealth, Pew released another one showing that Americans’ biggest complaint about the tax system is not how much they themselves pay—only 11 percent cited that—but rather the fact that the wealthy don’t “pay their fair share,” cited by 57 percent. And it was Romney’s equivocating about releasing his tax returns that, more than anything, was offered to me by Republican voters in South Carolina as a reason for not supporting him. Even if they were not exercised about the rate he was paying, they were bothered by his presumption that it was nobody’s business.

Team Obama has clearly come to the same conclusion about Romney’s vulnerability on taxes. I’m still not sure they’ve calibrated their argument exactly right—instead of the “Buffett rule,” which would guarantee that any millionaire pays a tax rate of at least 30 percent, I’d rather see some straight talk about raising taxes on capital gains and dividends. It’s the 15 percent rate for investment income that puts so many millionaires well below the 30 or even 20 percent mark, and Obama, as someone who in 2008 prided himself on estimating voters’ intelligence highly, ought to be doing all he can to explain the actual problems of the tax code to them and the ways it could be improved by wholesale reform, without fear of losing them along the way. (This is not to mention the broader truth-telling challenge Obama is skirting, of talking to voters about the need for more tax revenue from the non-wealthy.) And like Mike Tomasky, I’d say that Obama could do a better job of amplifying the connection between tax fairness and economic growth. The centrist Democratic group Third Way drew attention to this recently with a poll that showed voters responding far better to a message about growth and opportunity than to one about fairness. Like others, I found the poll questions fairly slanted and dubious, but I agree with Tomasky that Obama could strengthen his argument on this score:

This is the question—and I mean, it is the question—Obama and the Democrats have to figure out by the summer. Is their core economic message fairness, or is it growth? Liberals tend to say fairness. But I think fairness really only resonates deeply with liberals. Those not already in the choir want to hear more about growth. How to do that? Fortunately, there is an answer, and Obama himself sometimes supplies it in doses. In all of his economic speeches now ... he includes language arguing that we need to invest in the middle class not merely on fairness grounds, but because investing in the middle class is really the way to create growth. In this narrative, middle-class consumers with money in their pockets, not trickle-down 1 percenters, are the real “job creators.”

But that’s all fine-tuning. The bottom line of Tax Day—line 76 on the 1040 form, as it were—is that we’re talking about taxes a lot differently than we were just three years ago. Texas is still part of the union, and a secretary in Omaha is getting more airtime than a governor in Austin.

follow me on Twitter @AlecMacGillis