Lowering Taxes on the Middle Class Is a Loser for Democrats
Mother Jones
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Eric Levitz argues today that Democrats need to campaign on lowering middle-class taxes:
The party has plenty of internal disagreements on pocketbook issues. But there is a broad consensus on Team Blue that the tax code should be more progressive. It shouldn’t be difficult for Nancy Pelosi and Chuck Schumer to unite most elected Democrats around a tax-reform blueprint.
Such a plan could combine return-free filing with a massive increase in the tax credits for earned income and child care, financed by healthy increases in the taxation of high-income individuals and multi-million-dollar estates. The party could also go more ambitious, and offer a detailed plan for overhauling the tax system with an eye toward simplicity and progressivity.
Here’s the problem with this: Middle-class Americans barely pay any federal income tax at all. Here’s the data from the Tax Policy Center for 2013:
The income quintile in the dead middle pays 2.6 percent of its income in federal income taxes. How much less do even Democrats want to make it?
If liberals really want to have an impact on the middle class, they have to focus on other taxes. For the middle quintile, the payroll tax is about four times higher than the income tax. State sales taxes are in the same ballpark. Those are the taxes that matter. As far as the federal income tax goes, if Democrats really want to lower and simplify it, they should just propose a zero percent rate up to an income of $100,000, along with an EITC that refunds money to the working poor. That would be pretty popular.
Of course, it would also mean that Democrats have decided to battle Republicans on their home field, which is probably a losing strategy. It also means they’ll have a much harder time justifying single-payer health care, free college, subsidized daycare, and all the other stuff they support. Sure, they can pay for some of this stuff by raising taxes on the rich, but that only takes you so far.
If I had to guess, I’d say Democrats are better off focusing on more and better services for the middle class, not lower income taxes. That redistributes income at least as well as progressive tax rates. Probably better.
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