You can almost always count on Republican presidential candidates to be united in their opposition to more taxes for the rich. But this time around, the 2012 field is standing lockstep behind a less traditional idea: the middle class pays too little in taxes.
Thanks to a strange convergence of conservative ideological trends since President Obama’s election, Republicans now are expected to protest the entire bottom half of taxpayers’ contributions as too stingy even while they proclaim Americans are “Taxed Enough Already.” And they’ve yet to figure out a policy that will satisfy both complaints at once.
In recent months, nearly every major Republican candidate has name-checked a popular statistic that 47% of Americans who file taxes paid no income tax in 2009. Given the GOP’s anti-tax zeal you’d think they’d be celebrating. Nope!
“Right now we know that 53% of Americans pay income taxes and 47% do not,” Michele Bachmann told Bloomberg TV on Tuesday. “I think we definitely need to change the tax code. We need to get more in line. Everybody benefits from this magnificent country. Everybody pay something.”
Not only do statements like Bachmann’s seem to defy past Republican orthodoxy, but the candidates are explicitly making the argument on the same fairness grounds that progressives like Elizabeth Warren have used to demand greater taxes on the rich. The idea isn’t just that tax breaks for the rich trickle down the poor — it’s that they also deserve them more than freeloading Americans. Rick Perry made this moral outrage a key line in his campaign kickoff.
“We’re dismayed at the injustice that nearly half of all Americans don’t even pay any income tax,” Perry said in his announcement speech. “And you know the liberals out there are saying that we need to pay more.”
Now the 47% number only tells part of the story: most of those “non-payers” pay payroll taxes, gas taxes, state and local taxes, etc. And in an ironic twist, the phenomenon is almost entirely a result of Republicans’ own enthusiasm for tax cuts. In the 1980s and 1990s, GOP lawmakers demanded that any programs aimed at helping poor and middle-income households be structured as refundable tax credits, like the Earned Income Tax Credit, rather than as direct payments like welfare. President Bush added to the trend by lowering marginal rates across the board. Then Obama structured large chunks of the stimulus as tax breaks in order to garner bipartisan support. The non-payer rate, which had hovered around 20% – 25% since the 1950s, shot over 30% in 2002 and never looked back. And because the tax credits are refundable, many taxpayers aren’t just paying nothing, they’re actually gaining a net positive on their income tax.
But now that Obama is playing hardball on raising revenue, Republicans are rethinking the idea.
“It’s Republican class warfare,” former Reagan adviser Bruce Bartlett told TPM. “The Democrats say ‘Oh, the millionaires, we need to tax them’ and so they respond in kind.”
Bartlett’s not opposed to the idea of a broader tax code. But the problem is there’s no obvious way to get there without violating other Republican sacred cows on taxes or running into political territory that few politicians dare to tread.
The first issue is that any Republican proposal can’t raise revenue overall — a principle that’s only become more ironclad in the Tea Party era. The obvious solution then is to raise taxes on the middle class but give the money back to the rich and that’s exactly what two of the Republican presidential candidates have proposed. Jon Huntsman would eliminate all tax breaks without exception and use the money to lower marginal rates — the net effect of which would be a middle class tax hike.
Huntsman’s idea has largely gone unnoticed amid his campaign struggles, but one of his rivals’ proposals is gaining widespread attention this week: Herman Cain’s 9-9-9 plan. Cain solves the non-payer problem by replacing the tax code with a 9% income tax, business tax, and new national consumption tax, the combination of which would significantly raise taxes on lower income Americans. And that’s assuming it even raises enough revenue to avoid more cuts to entitlements, which is a major question mark.
But conservatives, even those who agree with the principle, aren’t sold on that idea either. A large part of it is because the politics are atrocious. Poll after poll shows widespread support for raising taxes on millionaires and Republicans aren’t likely to fare any better if they pair new tax breaks for the rich with tax increases on average Americans.
Dean Clancy, Legislative Counsel for Tea Party organizer Freedomworks, seems like the perfect demographic for Cain’s idea on paper. And he’s even sympathetic to the principles behind it on both moral and economic grounds.
“In an ideal system you would not tax businesses at all and you would tax all individuals at the same low rate with no special interest loopholes,” Clancy told TPM on Wednesday. “If you want to help poor people, do it outside the tax code.”
But he’s not on board with Cain and one reason is because American voters aren’t ready for that kind of change.
“It’s politically always hard to do something that raises taxes for some and lowers for others,” he said. “So the consensus is really for cutting taxes and the only way you can do that is by cutting spending.”
The other issue Clancy and other anti-tax conservatives like Grover Norquist cite is Cain’s reliance on a consumption tax to finance government. Until recently, a national sales tax has been largely a Republican idea: Rick Perry even gave it a shout out in his book. But in recent years, Republicans have decided it’s too close to European countries’ Value Added Tax, sparking fears that politicians will use it as a Trojan Horse for socialism.
But if Republicans beyond Cain and Huntsman are unwilling to raise taxes on the bottom half of taxpayers or transition to a consumption tax, their hands are tied. TPM asked both the Romney and Perry campaigns how they’d handle the 47% problem they’ve both derided, but received no response.
In the meantime, left-leaning wonks are only growing more frustrated with the glaring paradox.
“If the Republicans are suggesting that it’s bad that some people are not paying federal income taxes, can they please clarify that they are in fact proposing a tax increase?” Steve Wamhoff of Citizens for Tax Justice told TPM in an e-mail.
