Raising Taxes on Everyone but the Wealthiest Americans?

A few weeks ago, it appeared as though certain House Republicans would have rather seen the country go into default rather than raise taxes. Now it seems that the GOP is willing to let the temporary payroll tax cuts expire as planned. This is the same GOP who fought hard to make sure the Bush tax cuts did not expire (as that would have been a tax increase).

It is interesting that the GOP suddenly had a change of heart over taxes. It is even more interesting that they support a tax increase that will mostly likely affect lower and middle class income earners, not the super rich. Recall Warren Buffett's op-ed piece from the NY Times last Sunday. In the article he talks about how many of the wealthiest Americans pay less in taxes than middle class wage earners because the wealthiest tend not to pay payroll taxes. As Buffett explains:

"If you make money with money, as some of my super-rich friends do, your [tax] percentage may be a bit lower than mine. But if you earn money from a job, your percentage will surely exceed mine — most likely by a lot.

To understand why, you need to examine the sources of government revenue. Last year about 80 percent of these revenues came from personal income taxes and payroll taxes. The mega-rich pay income taxes at a rate of 15 percent on most of their earnings but pay practically nothing in payroll taxes. It’s a different story for the middle class: typically, they fall into the 15 percent and 25 percent income tax brackets, and then are hit with heavy payroll taxes to boot.

… In fact, 88 of the 400 [largest income earners] in 2008 reported no wages at all, though every one of them reported capital gains."

Politifact did a fact check on Buffett's statements and demonstrated why his statements were true. They go into great detail about how the current structure of the capital gains tax encourages individuals who earn income on investments to declare most of their income as capital gains in order to avoid paying payroll taxes.

So although the GOP is not blatantly coming out and saying they support raising taxes for everyone but the super rich, their statements as of late suggests that is their position on the issue. Furthermore, conservative talk show pundits have also been taking increasingly hostile position towards the "poor". The Daily Show did a segment on this last Friday.

Taking such a strong stance against lower income earners and in favor of the wealthiest Americans is an interesting strategy given that most voters (including Republicans) are lower and middle class, and are struggling given the economic climate. Can this be a viable electoral strategy? In terms of campaign donations, I think it will have a positive impact on donations. In terms of voter turnout, I think this strategy will either have no effect on turnout, or a slight negative effect. 

First, the strong position the GOP is taking on behalf of the wealthiest Americans will probably encourage wealthy Republicans to make large campaign contributions (especially to super PACs). So in this respect, this strategy gives Republicans a great deal of resources to spend on campaign ads and events. Next, the strong position the GOP is taking against the poorest Americans will either (1) not have an effect on Republican voter turnout in 2012 or (2) will have a slight negative effect. Primarily, the literature on voting behavior in the US suggests that individuals rarely take into account their own economic self interest in voting. Hence, the average Republican voter in 2012 may not take into account that GOP leaders want to raise their taxes. Nevertheless, the combination of a strong vocal stance against lower income earners and a weak economy could just be enough to discourage at least some Republicans (and independents) to not vote or to switch votes. We shall see in 2012.

Julie VanDusky-Allen

About Julie VanDusky-Allen

Julie VanDusky-Allen is at Boise State University and received her PhD in Political Science from Binghamton University in 2011. Her research focuses on institutional choice and development, political parties, the legislative process, and Latin American politics.

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