Paul Krugman says that the Republican Party may throw the modestly rich "overboard" to protect the fortunes of multi-millionaires.
In a blog post on Tuesday, Krugman focuses on one tax proposal floated by Congressional Republicans that would essentially create a "tax bubble," disproportionately hurting the upper middle class. (Nate Silver has an explanation and a chart here.) Krugman writes that taking this tack would let the GOP protect the super-rich at the expense of the working rich (using the decades-old language of Oliver Stone's Wall Street) who make six-figure salaries.
"When push comes to shove, the GOP seems ready to throw the bottom 90 percent of the top 1 percent overboard, in order to protect its real patrons, the superelite," Krugman writes.
The Obama administration and Congress are in talks to reach an agreement avoiding the fiscal cliff: a set of tax hikes and spending cuts scheduled to take place at the end of the year if they do not agree on a deficit reduction plan.
Some Congressional Republicans, including House Speaker John Boehner, have said they are open to raising tax revenue but remain opposed to raising marginal tax rates. Here's a great explanation of marginal tax rates from economist Dean Baker (h/t Jason Linkins):
The tax system brackets give marginal rates. This means that if the raise bumps you into a higher bracket then you pay more taxes only on the income in the higher bracket. Suppose that the tax bracket for income under $200k is 25 percent, and for income over $200k is 33 percent. If you get a raise that pushes your income from $195,000 to $205,000 then you only pay the higher 33 percent tax rate on the $5,000 that is above the $200k threshold not your whole income. Therefore, there is no (as in none, nada, not any) way that getting more money, and being pushed into a higher tax bracket will leave you with less money after taxes.
One Republican proposal would tax a household's entire income at the highest rate possible, rather than just the portion of income that exceeds a certain limit. Doing so would penalize some people for making more money, as Nate Silver notes.
Republican Congressmen also have proposed raising tax revenue by limiting deductions, which could disproportionately hurt the upper middle class. Some Senate Democrats have said they are open to capping deductions.