Tax Revolt

Back in 2007, Mark Schmitt wrote a column arguing that we were nearing the end of the great “tax revolt” launched in the late-1970s that’s made it so difficult to do big progressive change. Kevin Drum has some big doubts:

So how’s that going? At the time I remember thinking that Mark’s piece was fairly persuasive, but the 2008 campaign sure doesn’t seem to bear it out. Barack Obama, the progressive candidate, has certainly not campaigned on tax increases. In fact, he has loudly and consistently based his campaign almost entirely on a promise to cut taxes for 95% of Americans. He could probably fund the national debt for the price of the ads touting his tax cutting credentials. Amidst all that, the only teensy weensy concession he’s made to higher taxes is an increase — all the way to 1990s levels! — for the highest earning 5%.

This is, of course, about as moderate a tax policy as you could possibly hope for. But even so, he’s only barely gotten away with it. The response from the McCain campaign to that teensy weensy increase has been to go completely ballistic, accusing Obama of everything from socialism to Marxism to wanting to firebomb Joe the Plumber’s cozy little Ohio cottage. In the end, it looks like this barrage of inanity won’t work, but conservatives are sticking to it and they really do seem to be getting at least some traction with it. If Obama had nodded even slightly further in the direction of tax hikes, there’s a good chance McCain would be making serious inroads on him right about now.

I think Kevin’s reading this evidence backwards. Obama’s tax proposals are a pretty clear piece of defense crouch politics, a proposal carefully crafted out of a desire to raise a bit of revenue without being tagged as a tax hiker. And Kevin’s right that it doesn’t seem to be working — Obama’s still getting slammed as a tax hiker. But the important part is that the slams aren’t working. John Chait points out that by a 50–44 margin, voters tell pollsters that they expect Obama to raise their taxes. Of course that’s wrong, Obama’s plan would cut taxes for the vast majority of Americans. But conservatives have persuaded most people that either that’s not what Obama’s plan would do, or else that Obama is just lying and he’ll go back on his pledge and offer a bigger, broader tax hike than he’s officially proposed. So Obama’s losing the argument. But he’s winning the election anyway which is perhaps an indication that he could have gotten away with a plan that did more to boost revenues.


That said, it’s everywhere and anytime politically difficult to raise taxes. Probably the greatest blow Ronald Reagan struck against American liberalism was changing tax law so as to index income tax brackets to the Consumer Price Index. Before that, each and every year inflation created a small tax hike. Consequently, the default scenario was for revenue to grow. That created a situation where for three decades following the end of World War II, politicians steadily increased the volume of public services while also offering the occasional tax cut. And until the economic malaise of the 1970s, voters liked the outcomes just fine. But by seizing the opportunity provided by the 1980 election to change this, Reagan was able to shift the structure of American politics in a fairly significant way. In many ways the biggest challenge facing an incoming progressive administration backed by progressive congressional majorities is to find some equivalent measures — things you can pass at a moment of political strength whose impact will continue to be felt long after that political moment fades.