WASHINGTON -- Virtually all the Democratic presidential contenders say they will raise taxes only on the richest Americans, but the truth is, their tax increases will likely hit people further down the income scale.
Democrats supposedly learned their lesson when former vice president Walter Mondale barely carried only one state (his own) in his ill-fated 1984 presidential campaign, after he proposed tax hikes on annual incomes of more than $60,000. Now Democrats insist they would raise taxes on people earning $200,000 a year and up.
But middle-class voters have reasons to be skeptical of such promises that they or their employers would be untouched, because tax hikes on the top brackets always have unintended consequences that affect people in the lower tax brackets.
If the Democrats campaign on raising taxes just for those at the top tax rate (now 35 percent under the Bush tax cuts), "it will backfire on them for two reasons," said economic strategist Cesar Conda, who was Vice President Dick Cheney's chief domestic policy adviser.
"No. 1, a lot of small businesses, small proprietorships pay the top individual tax rate, so they will be raising taxes on small businesses and entrepreneurs," Conda said. While little businesses earning $200,000 or more a year sounds like a lot to the Democrats, the people who run them and perhaps employ others hardly consider themselves rich.
"No. 2, a lot of polls I've seen suggest the American people don't believe the Democratic tax increases will stop at just the rich, that eventually it will hit the middle class," he said.
Tax-cut crusader Grover Norquist has said how that would be done. "When they talk about taxing the oil companies, that would be a tax on anybody's 401(k) retirement plan that invests in Exxon-Mobil stock," he said. Half of all Americans are invested in the stock market, and tens of millions of these workers are middle class.
Even cautious Democrats are warning their presidential candidates to be careful about how they define the tax issue, fearing it could hurt their party's chances in 2008.
"The preconceptions about the Democrats is that they are more likely to raise taxes than the Republicans, so you have to be careful," said James Kessler, issues director for the Third Way, a centrist-leaning Democratic advocacy organization here.
"Democrats have to define themselves as proponents in the battle for the middle class so that any tax increases they espouse, like rolling back part of the Bush tax cuts for the wealthy, should be used primarily for middle-class tax cuts," he said.
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