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Among the more interesting points in the Leonhardt piece is the idea that the last few decades of rocketing inequality have dramatically transformed the contours of taxation as a political issue. I've argued often on this blog that given how much income is concentrated in the hands of the rich, you can cut taxes for the majority of the country, raise taxes on a small slice of wealthy Americans, and raise revenue, even as the average American's tax bill goes down. As Leonhardt argues, the relentless march of wealth accumulation -- the rich getting much richer, year by year -- made this truer in 2008 then it was in 2007, truer in 2007 then in 2006, and a helluva lot truer in 2006 then it was in 1993. Obama, Leonhardt says, understands this:
Politically, he is trying to drive a wedge through the great Reagan tax gambit...For the bottom 80 percent of the population — those households making $118,000 or less — McCain’s various tax cuts would mean a net savings of about $200 a year on average. Obama’s proposals would bring $900 a year in savings. So for most people, Obama is the tax cutter in this campaign...All told, Obama would not only cut taxes for most people more than McCain would. He would cut them more than Bill Clinton did and more than Hillary Clinton proposed doing. These tax cuts are really the essence of his market-oriented redistributionist philosophy (though he made it clear that he doesn’t like the word “redistributionist”). They are an attempt to address the middle-class squeeze by giving people a chunk of money to spend as they see fit.He would then pay for the cuts, at least in part, by raising taxes on the affluent to a point where they would eventually be slightly higher than they were under Clinton. For these upper-income families, the Tax Policy Center’s comparisons with McCain are even starker. McCain, by continuing the basic thrust of Bush’s tax policies and adding a few new wrinkles, would cut taxes for the top 0.1 percent of earners — those making an average of $9.1 million — by another $190,000 a year, on top of the Bush reductions. Obama would raise taxes on this top 0.1 percent by an average of $800,000 a year.As you see in the ad at the top, the Obama campaign is trying to turn taxes into a political win. Their dawning realization that the Republican obsession with preserving corporate profits and rewarding wealthy contributors has left Democrats as the country's tax cutters. But they're not explaining it well. The ad scans like a normal political ad: Republicans for corporations, Democrats for people. True enough. But that goes into the mental dustbin where all stereotypes reside. The Obama campaign has to figure out how to explain that the situation is different now: The the concentrations of wealth mean taxes aren't as progressive as they used to be, and there's a choice to be made in the tax code: Do you raise taxes on the rich to reduce them on the rest? Or do you let corporations and hedge fund executives hoard their gold? They're making one choice, McCain is making another. Somehow, they have to figure out how to present that not as a political attack, which it isn't, but as a simple statement of the public policy realities, which it is.
