Is there nobody left to defend the one percent?
Everywhere you look, fair-weather tax haters are abandoning the wealthy. Republican House Speaker John Boehner, champion of "job creators," now says he's open to "new tax revenue" to help balance the federal budget. The uber-conservative William Kristol, editor of the Weekly Standard, said recently on Fox News, "It won't kill the country if Republicans raise taxes a little bit on millionaires." A group of pesky agitators called "patriotic millionaires" is even descending on Washington, to badger legislators into raising their own taxes, for the supposed good of the country.
This all comes, of course, after President Barack Obama, campaigning on his plan to raise taxes on the wealthy, convincingly beat challenger Mitt Romney, whose tax plan called for cutting everybody's taxes by 20 percent. In exit polls, about 60 percent of voters said they favor raising taxes on high-income Americans to help reduce the federal deficit and protect spending that helps the middle class.
The battle now seems likely to shift to who, exactly, constitutes the wealthy.
Under Obama's plan, tax rates would rise on individuals earning $200,000 a year or more, and on families earning upward of $250,000. But some families with income in that range don't feel particularly wealthy—especially if they live in a high-cost area like New York or San Francisco, and face bills for college tuition.
Republicans may now be developing a defensive strategy meant to push the threshold for tax increases higher than Obama wants, to maintain a semblance of their self-appointed mission to defend helpless citizens from the ravenous tax collector.
If tax hikes were literally targeted at the top one percent of earners, they'd take effect on incomes of about $500,000 or more. Households that earn $250,000 count among the top four percent. Pushing the threshold down to $200,000 expands it to the top six percent.
Kristol's comment might have been nothing more than a figurative way of referring to the affluent, but he may also have been signaling a deliberate effort among Republicans to set the bar for tax increases at those earning $1 million or more. If so, that would target tax increases not at the one percent, but at the 0.5 percent, which would allow Republicans to say they protected nearly all other Americans from an onerous and destructive tax hike. Even some Democrats have favored that threshold in the past.
But setting the bar for tax hikes that high wouldn't do much to close those yawning federal deficits. Hiking tax rates on $1 million-plus earners to the levels Obama has proposed would raise, at most, about $70 billion per year, according to data from the nonpartisan Tax Policy Center. That would only cut this year's projected deficit by about 8 percent. Lowering the threshold for tax hikes to $250,000 would still only generate about $83 billion—less than 10 percent of the annual deficit.
Most budget experts realize that there's no way to truly shrink the national debt without raising taxes on the middle class, plus cutting programs such as Medicare and Social Security, that directly serve a lot of ordinary people. If tax hikes on the middle class were allowed to rise as scheduled in 2013 (which politicians of both parties have pledged to block) it would raise about $170 billion in annual revenue. That's more than twice the amount that tax hikes on the wealthy would raise. So eventually, politicians will either have to target the middle class, or tax the rich so much that they're no longer rich.
Rick Newman is the author of Rebounders: How Winners Pivot From Setback To Success. Follow him on Twitter: @rickjnewman.