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How Raising Taxes Can Be a Winning Issue for Obama

There’s something unusual about the argument currently dominating the U.S. presidential election. Republicans think they’ve got a winning hand arguing that President Barack Obama will raise taxes. And Democrats think they’ve got a winning hand arguing that President Obama will -- raise taxes.

Republicans spent last week arguing that the Affordable Care Act is a giant tax increase. This week, Obama scheduled a special statement in the East Room of the White House to announce that he would raise taxes on the rich.

It’s true that compared with current law, Obama’s support for extending the Bush-era tax cuts for the bottom 98 percent of taxpayers represents a huge tax cut. But compared with the Republican proposal to extend the cuts for everyone, which is the relevant comparison for the election, Obama’s plan constitutes a tax increase on the top 2 percent.

Insofar as this election can be reduced to a single policy question, it’s this: Which is more unpopular? Raising taxes? Or refusing to raise taxes on the rich?

Neither proposition is, on its face, a winner. In April, a Fox News poll asked registered voters: “Would you agree to pay higher federal taxes if all of the money went toward paying down the national debt?” Sixty percent said no. That same month, the Gallup Organization asked Americans whether their taxes were “too high,” “too low,” or “about right.” “About right” beat “too high” by one percentage point -- well within the poll’s margin of error. Only 3 percent said their taxes were “too low,” suggesting little willingness among Americans to pay more.

Popular Taxes

At the same time, polls consistently show that increasing taxes on the wealthy is hugely popular. In the same Gallup poll, 62 percent of respondents said “upper-income people” were paying too little in taxes. In a CNN/ORC International poll, also conducted in April, 68 percent of Americans agreed that “the present tax system benefits the rich and is unfair to the ordinary working man or woman” and 72 percent said they support changing the tax code “so that people who make more than one million dollars a year will pay at least 30 percent of their income in taxes.”

The result has been an effective stalemate on the issue. The latest Washington Post/ABC News poll found that 46 percent prefer Obama on taxes and 45 percent prefer Mitt Romney on taxes -- again, well within the poll’s margin of error. But the strategy the two campaigns have for breaking free on taxes couldn’t be more different.

The Obama campaign wants to be very specific about what will happen if we don’t raise taxes on the rich. The Romney campaign wants to be very vague about what will happen if we continue to keep taxes low on the rich.

Obama’s announcement on Monday was an effort to publicize one consequence of inaction: If Republicans refuse to extend the Bush tax cuts for only the bottom 98 percent of taxpayers, insisting instead on extending them for the top 2 percent as well, the resulting gridlock could trigger a tax increase for everyone. Obama wants to saddle Republicans with two unpopular tax positions simultaneously: Republicans are so intent on not raising taxes on the rich that they’re willing to raise taxes on everyone else.

In previous remarks, Obama has emphasized the sort of budget cuts -- and tax increases -- that Republicans would have to enact to pay for their promises.

Spread Evenly

“They haven’t specified exactly where the knife would fall,” Obama said in June. “But here’s some of what would happen if that cut that they’ve proposed was spread evenly across the budget: 10 million college students would lose an average of $1,000 each in financial aid; 200,000 children would lose the chance to get an early education in the Head Start program. There would be 1,600 fewer medical research grants for things like Alzheimer’s and cancer and AIDS; 4,000 fewer scientific research grants, eliminating support for 48,000 researchers, students and teachers.”

“But it doesn’t stop there,” Obama continued. “Even if you make all the cuts that they’ve proposed, the math still doesn’t allow you to pay for a new, $5 trillion tax cut and bring down the deficit at the same time. So Mr. Romney and his allies have told us we can get the rest of the way there by reforming the tax code and taking away certain tax breaks and deductions that, again, they haven’t specified. They haven’t named them, but they said we can do it. But here’s the problem: The only tax breaks and deductions that get you anywhere close to $5 trillion are those that help middle-class families.”

Here again, the message is if we don’t raise taxes on the rich, we’ll have to raise them on you -- and cut crucial services and popular programs, to boot.

Obama isn’t lying when he says Republicans haven’t said where the knife will fall: Although both Romney and House Budget Committee Chairman Paul Ryan have promised to pay for their planned tax cuts, neither has detailed how. The reason is obvious: The spending cuts and tax increases necessary to offset their tax cuts are highly unpopular. That suggests the Democrats have the stronger political argument. If refraining from raising taxes on the rich led to more popular policies than raising taxes on the rich, you can bet Republicans would be laying out their specifics; instead it’s the Democrats doing so.

Still, Republicans haven’t necessarily chosen a bad strategy. You can go far in politics being vague. And the refrain that Democrats want to raise taxes is more readily understood than the consequences of Republicans blocking high- income taxes from rising. In the New York Times Magazine, Robert Draper reported what happened when a focus-group moderator for Priorities USA, the pro-Obama super-PAC, explained to voters that Romney and the Republicans want to cut deeply into Medicare while cutting taxes on the rich: “The respondents simply refused to believe any politician would do such a thing.”

As in any game of poker, once the cards are down on the table, you usually find that one side actually holds the winning hand. The question is whether Democrats can call the Republicans’ bluff before November.

(Ezra Klein is a Bloomberg View columnist. The opinions expressed are his own.)

Read more online from Bloomberg View.

To contact the writer on this article: Ezra Klein in Washington at wonkbook@gmail.com.

To contact the editor responsible for this article: Francis Wilkinson at fwilkinson1@bloomberg.net.

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