Sens. Clinton and Obama want to allow the Bush tax cuts to expire, but only for those earning more than $250,000; former Sen. John Edwards would subject even more taxpayers to this higher tax burden (starting at $200,000). The Democratic field would shield middle-class taxpayers from the increased tax burden they would feel if the Bush cuts lapse by continuing the $1,000 tax credit for children, marriage penalty relief, and the 10% bracket for low-wage earners. Obama proposes giving 150 million middle-income Americans up to $500 in tax credits and eliminating income taxes for seniors making below $50,000 a year. Several say they would finance their ambitious universal government health plans by increasing taxes even further on the rich.
The Democratic field applies the same logic to the looming multi-trillion dollar shortfall in Social Security.
Clinton sees no need to alter Social Security’s promised level of benefits, rejects proposals to raise the retirement age, and claims future economic growth will take care of Social Security’s projected fiscal shortfall. Obama, in contrast, has incited an internecine Democratic war over his proposal to hit workers with incomes over $200,000 with Social Security payroll taxes. “If we simply ask higher income Americans to contribute a little more,” he says, “we can shore up Social Security for generations to come.”
But hold on. The wealthiest 1% of taxpayers (about 1.3 million in all) already bears a disproportionate share of the tax burden. In 2005, the latest year for which IRS data is available, they earned 21% of all the adjusted gross income. But they paid a whopping 39.4% of all the income taxes. And the 13 million households who earned more than $104,000 (the wealthiest 10%, who would bear the brunt of higher Social Security payroll taxes) accounted for over 70% of Uncle Sam’s take.
While the policy question is how much more they can bear, the political question may surprise the class warriors. Because the majority (58%) of wealthy households (defined as individuals earning over $100,000 and couples earning over $200,000) now reside in so-called Blue States, any campaign platform predicated on class warfare risks alienating the millions of Blue State voters who would have to foot the bill.