With the Bush tax cuts finally set to expire, Democratic leaders are starting to panic. The problem is not the expiration of cuts on top earners, but rather the end of those cuts that benefit middle class households.
A scramble is now under way to make sure that Americans of modest means don't see a tax hike next year -- but that the rich do get slammed right on schedule. Last week, Senate Finance Chairman Max Baucus said he would offer a plan to extend cuts just for middle class households while letting most other parts of the Bush law expire. The White House is said to be all for this approach.
But here's my worry: Democrats will succeed in whacking the rich and protecting the middle class, only to then keep their mouths shut about this accomplishment as the midterm elections approach.
As things stand, few people have any clue that President Obama has already lowered taxes for many households. A February poll found that twice as many people think that Mr. Obama has increased their taxes as cut them. Nearly half of all Tea Party supporters believe their taxes have gone up -- which helps explain what they are so angry about.
The failure of the Obama Administration to promote its already enacted tax cuts - as well as its long term plans to jack up taxes on the rich -- isn't just bad politics, it also undermines the President's longer term project of revitalizing faith in government. Polls have long found that the biggest complaint Americans have about taxes is that the rich don't pay their fair share. Mr. Obama was explicit on the campaign trail that he would change this, but since then has said little on the topic. Worse, when critics of healthcare reform whipped up a near hysteria about new taxes in the proposed law, Mr. Obama failed to aggressively counter that those taxes are mainly on the wealthiest Americans. Conservatives and Tea Party activists have been free to define Democrats as arrogant apostles of big government who are piling new burdens on ordinary Americans -- the exact opposite of what Mr. Obama is actually doing.
The President needs to take control of the tax debate. The easy part is selling those tax cuts which help middle and lower income Americans, as well as small businesses. Mr. Obama needs to repeat his success here at every opportunity and speak forcefully enough to be heard over the right-wing noise machine. Critics complained when the White House loaded up the 2009 stimulus package with tax breaks in a futile bid for Republican votes and they were right. Now it's time for Mr. Obama to realize the upside of this bad decision by reminding voters of that tax relief.
As important, the White House needs to loudly trumpet its planned tax hikes on the wealthy. Ever since Scott Brown's senate victory in Massachusetts, Mr. Obama has been playing catch up on the populist front -- often in ways that seem insincere. But there is nothing disingenuous about the President's commitment to shift more of the tax burden onto the upper class. He campaigned on this promise and his budget now before Congress follows through by proposing, among other things, to more than double taxes on some of America's very highest earners who work in hedge funds and private equity.
Some Democrats are sure to worry that advertising tax hikes on the rich will sound like class warfare and may scare off supporters in business and in affluent parts of the country. That seems unlikely. High-income Americans were well aware that Mr. Obama planned to raise their taxes when he ran for President, yet he still won eight out of ten of the wealthiest counties in the country. During his years in the Senate, Mr. Obama co-sponsored a bill to close the tax loophole that allows those in hedge funds and private equity to pay much lower taxes than their secretaries. Yet during his campaign, these financiers contributed to Mr. Obama by a much higher margin than to Senator John McCain. Mr. Obama raised twice as much money from employees of hedge funds than Mr. McCain.
The politics of taxes have changed. Affluent Americans are increasingly okay about paying higher taxes, especially if the new funds are used to invest in things like education, infrastructure, and scientific research. Many winners in the knowledge economy understand that they will do better over the long term if an active government helps build the foundations of that economy.
These days, much of the anti-tax fervor is based in downscale parts of the country, among Americans who have lost ground amid the economic shifts of recent decades. Mr. Obama has the goods to convince these voters that he is on their side - but only if he speaks up.
And if the Democrats do take heat on taxes from the Masters of the Universe set, all the better. It will be one more reminder that the Party still speaks for the common person.