The Re-Emergence of Taxation As a Political Issue

How to Use Economic Insecurity for Republican Ends

By Adam C Posted in Comments (9) / Email this page » / Leave a comment »

When Michael Barone asked "Is the Tax Issue Back?," I was skeptical. Taxes are lower than in the 1980s and 1990s. Sure there will be a debate on extending the Bush Tax Cuts, but it doesn't seem to get people riled up the way it used to. However, in a time of perceived economic insecurity, raising taxes is taking more money from the people who already feel pinched. Further, while pork barreling continues, corruption is all over the papers, and Washington insiders line their pockets, there is little appetite to send more money to Washington.

But what really opened my eyes was watching the 2007 state election results and the massive anti-tax vote coming in around the country. See Below Fold for rundown.

With this revival in mind, it seems odd that Democrats running for President are getting behind higher taxes. Sen. Obama called for higher social security taxes. Sen. Clinton has argued for raising taxes on private equity and would consider raising social security taxes. And those comments don't even consider the fact that the Democrats are promising the world in spending, which has to be paid somehow. Will all this tax hiking fervor get stomped down as harshly as the local taxes were in 2007? Perhaps the re-emergence of the tax issue will help Republicans by providing an issue on more favorable ground than some of the other major issues in 2008.

NC: The Democratic state legislature passed a law allowing counties to pass a new tax, the "Land Transfer Tax." This tax would be a one-time tax on the sale of any home at .4% of value. 15 counties put the tax on the ballot. And 65%-80% of voters rejected it in all 15 counties. The local press is trying to spin this as a way to "pay for growth" as if growth requires higher tax rates for some reason. But NC voters didn't want higher taxes and they sent a big message.

NJ: The Democrats pushed for several tax increases on the state and local level. NJ voters rejected a statewide initiative for the first time in 17 years. The liberal Philly paper explained that "outrage over ever-rising taxes drove Tuesday's defeat of $450 million in bonds to fund stem-cell research and another measure to earmark more sales-tax revenue for property-tax reform." Also the outrage led to some Republican gains as "Several angry residents renounced the ruling Democrats and registered as Republicans in order to run."

WA: The local rags' headlines read "election shows anti-tax mood" and "The anti-tax landslide". They are describing the passage of I-960.

Allowing school districts to raise levies with a majority vote, not passing. Thurston County sales tax to prevent juvenile crime? Shot down. Requiring government to keep a savings account? Passing. The massive roads and transit tax package in metro Puget Sound? No sir.

The cash spent to support the simple majority for schools doesn’t seem to have worked. Nor did the huge amounts of cash spent to stop R-67, allowing people to sue their insurance companies for triple damages.

In short, the trend is consistent: no to anything that might force people to pay more.

Other States: Oregon rejected a tobacco tax for the third time. Maine upheld term limits and Texas passed a law to require more transparency in earmarking. Both accountability measures ensure it is more difficult to raise taxes in the future.

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The Re-Emergence of Taxation As a Political Issue 9 Comments (0 topical, 9 editorial, 0 hidden) Post a comment »

I , too, was heartened by the votes in NJ, NC, and Oregon.

I believe taxes is the one issue that provides for a majority conservative coalition. I think people understand instictively that even though politicians always tell them someone else is going to pay that ultimately their taxes are going to be raised, as well.

To me it is an issue of freedom. Taxes are collected at the point of a gun. I think sometimes we forget that this country was formed based on revolting against taxes. I sense we are close to that point again. Some of the statistics are, I believe, misleading. I just get the sense that people at every income level feel like they are being taxed into submission. Even if they aren't paying higher Federal income taxes, their state and local governments are squeezing them. I also believe that people know inherently that, if they already have health care insurance, being asked to help pay for 47 million other people's is not going to benefit them.

I'm shocked that the Dems feel like they can speak openly about raising any taxes. I also wish the Republicans would speak more forcefully. How can we even be suggesting raising taxes when government receipts are at record highs? Our federal government will spend close to $3 Trillion and that is not enough to take the necessary care of our citizens? We ought to be firing this Congress. Add to that what states and municipalities are spending. I believe government is running amok and I think a majority of Americans feel that, too.

If you accept the theory that reduced housing values across the country is making ordinary people feel less wealthy, then it stands to reason that they would not be feeling generous to their state and local governments.

I'd be interested in a comparison with prior years, however. Something tells me that middle and lower class voters tend to reject local tax increases and bond issues, no matter how they feel about their own financial position.

But you're making the connection to the Democrats running on the national level, and I'm not as sure this applies. Because Obama and Clinton have both said repeatedly that they only intend to raise taxes on "the rich."

To sell against this story, you have to get people to see that the numbers don't add up, and also that class warfare ends up hurting everybody.

Complicated messages like that are a lot harder to sell than simple ones like Clinton's "fairer and more progressive tax system."

(Do I think ordinary voters are too stupid to see through the Dem story line? Umm, no comment.)

And I note that bond issues did well overall despite the anti-tax turnout. Only the NJ stem cell research bond failed. A dozen other local bonds passed.

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...is that they have started failing in the marketplace. There's a complicated interaction between distressed subprime-mortgage portfolios and state/local financings, and I've forgotten how it works, but it's having the effect of making tax-frees a lot less attractive to investors at current yield spreads. I heard a story that Miami and some other city just pulled new debt offerings because they weren't selling.

Combine this unusual effect with the coming economic slowdown (if it materializes) and you have a brutal environment for state/local government finance.

States and localities always crank the spending up real high in good times (buys votes, of course), and since they can't print money like the Feds can, they always get crushed when the cycle turns. Distress in the bond markets ought to make this all the worse. Pass the popcorn.

how out of step the Liberals/Democrats are with America.
They read the 06 elections as an endorsement of their ideology, when it was more a rejection of the status quo (corruption, liberal republicans). The campaigns are - in many ways - much more up front and honest than we've ever seen.

The Liberals see this as their chance - the first in quite a while - to usher in a socialist agenda and they are not hiding that fact. If they can control the electoral branches of government, and by extension, the courts, they know there will be little to stop them.

Fortunately, while most of America does not pay attention to the political minutiae (like many of us do), they do pay attention to their own households and they understand that the ideas many of the Democrat candidates are campaigning on will result in higher taxes. With the current financial/economic volatility, many people realize a raise in taxes would be detrimental, as opposed to the 90’s bubble, where it seemed money was growing on trees.
R.J.

Hillary, Obama, Edwards, et al. have made it clear that they do not intend to raise taxes on the 'middle class,' only the dastardly rich.

We all know that this will have a negative impact on everybody, and that promises to not raise taxe on the middle class have a history of being broken, but most people will just eat this crap up. Yeah, soak the rich!!

This election will see new lows of populist economic B.S., and Republicans better have an effective strategy for countering it.

The naive forgive and forget.
The foolish forget but do not forgive.
The wise forgive but do not forget.

That's the prevailing attitude across the United States. Here in Minnesota, we rejected a number of school levies to increase property taxes. Prior to this year, I'd rarely heard of levies failing, at least not at this rate.

There's a little town just west of where I live called Rockville. This editorial in the local paper sums up what's happening here in Minnesota.

Wherever I've looked, Democrats are overreaching because they misread last November's elections.

Check out my posts about State Sen. Steve Murphy & State Rep. Cy Thao.

I'll bet you can find these types of quotes everywhere across America.

taxes can and should always be an easy issue for the GOP to win on. 2006 maybe excepted given it was a unique Year Six election. But it will he huge in 2008 esp given the dem congress takeover and the way the dem 09 nominees will MIRROR what the public sees the dems doing.

trump card for the GOP

as will be national security and cultural issues

wait and see

Mike Gamecock DeVine @ The Charlotte Observer
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Tax rates may be lower than the '80s and '90s ... but Federal revenue is UP!

I will never forget 1986: our own President Reagan decided to "reform" taxes, and said "We're only taxing the Rich!"

I thought that was a GREAT idea at the time: "let them millionaires share their booty."

Next year, with a salary of about $35,000 ... I found out I WAS RICH! And our beloved President Reagan took an even bigger bite out of my (newly rich) bum!

The lesson is this: the majority of the not-so-rich voting populace will always respond positively to the Tax-the-Rich meme. And will allow themselves to be lead like lambs to be sheared.

The Democrats may be worse, but our Republicans were little better these past few years ... spend, spend, spend.

Congress hasn't saved a penny in "Trust Funds" ... the money is long since gone. If spending isn't cut (Which Congress Critter will be the first to give up funds for a local ball-o'-wax museum?) ... we will be taxed unto death ... and both are certain.

"The Rich" (the real ones) won't care: Warren Buffet saved over $13 billion in taxes, giving money away; the Hedge Fund managers (the ones who drove oil to near $100/bbl) will keep their tax breaks; Citi Group will get a mortgage bailout, thanks to Chuck Schumer (D-NY). We will be complicit:

Representatives passed a measure raising taxes on executives at hedge funds and private-equity firms by $49.5 billion over the next decade to prevent a separate, $50.6 billion tax increase [they meant AMT, by the way] on middle-income families.
...
The bill now goes to the Senate, where Majority Leader Harry Reid said it wouldn't be considered until next month.
...
The White House said President Bush would veto the bill if it has tax increases.

In Congress, "booty call" means another chomp out of your wallet. The Democrats may lose a few votes on taxes, but if our candidates can't take a stand against both taxes and spending, it's a non-issue.

 
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