Mitt Romney’s tax return saga didn’t only help catapult former House Speaker Newt Gingrich to a South Carolina primary win —it may also help Obama breathe new life into a tune he’s been singing for the last five months: tax the rich!
In his State of the Union Address Tuesday, President Obama will tout new plans to make wealthier individuals and corporations pay a higher percentage of their income in taxes than middle and lower-income earners. White House officials say this is one way to stem the growing income gap as well as finance government. “We can go in two directions,” Obama said in a State of the Union preview video. “One is toward less opportunity and less fairness. Or we can fight for where I think we need to go: building an economy that works for everyone, not just a wealthy few.”
Republicans and others, on the other hand, point to the fact that 47 percent of all tax filers pay no federal income tax -- that number includes all income segments, but is heavily weighted to lower income earners. And, according to the right-learning Heritage Foundation, the top ten percent of income earners paid 70 percent of federal income taxes.
The Buffett Effect
Last September Obama broadcast a proposal from billionaire investor Warren Buffett to let the Bush tax cuts expire for those who earn $1 million a year and increase the taxes they pay on dividends and capital gains. But much has changed since then. A perfect storm of Occupy Wall Street sentiment topped with public consternation over Mitt Romney’s initial reluctance to make his tax returns public may give Obama an opportunity to pounce on an issue that so far hasn’t advanced beyond lip service.
The Occupy Wall Street movement, which took hold in September, gave Obama his first real leg-up to push taxing wealthy individuals and businesses to reduce income inequality, said Brad Bannon, a democratic strategist. “But what none of us saw coming was that Romney, through his controversy, is actually keeping the discussion going, which is kind of ironic,” he said. “The Romney thing is really like a gift from God to the President… it’s basically a softball that’s been lobbed at the President, and now for the first time he really has a chance to hit it out of the park.”
The Romney hubbub started when the former Massachusetts governor and investment mogul, who is estimated to be worth between $200 and $250 million, lost his composure and his commanding lead in the South Carolina polls last week after his GOP opponents asked why he hadn’t released his tax returns—something every Republican and Democratic presidential candidate has done for decades. Romney told reporters his effective tax rate was near 15 percent—a far cry from the 35 percent top tax rate on wealthy earners, and a much lower rate than either President Obama or his chief primary rival Newt Gingrich pay. According to 2010 tax returns, Gingrich and his wife Callista paid an effective tax rate of about 32 percent, and the President and the First Lady paid about 26 percent.
Even though Romney now plans to release his 2010 tax returns and preliminary 2011 returns on Tuesday, some of the damage may have already been done. The first polls out of Florida today from Rassmussen show Gingrich leading Romney 41 percent to 32 percent.
The Romney Effect
Political strategists from both parties say Romney's returns all-but-guarantee the White House ammunition in its quest to overhaul the tax code to tax the wealthy more heavily. In fact, some Republican voters may even listen up. According to an October Bloomberg-Washington Post poll, 53 percent of self-identified Republicans support hiking taxes on households earning more than $250,000 a year.
But ask Republican strategists, including in those in Gingrich’s camp, and they say that in the end, Republican voters will reject any wealth-redistribution attempts through the tax code, no matter how Obama frames it. “The President can try to contextualize this as much as he wants. But he can’t get away from the fact that if he raises taxes on those making over $200,000 he’s talking about raising taxes on 894,000 small businesses,” said David Winston, a Republican strategist advising the Gingrich campaign. “He can try to find whatever rationale he wants, but that ultimately is how voters are going to view what he’s trying to do.”
And Romney’s riches don’t have to only serve as fodder for the opposition, say some strategists. “From here on out, it’s about how Romney handles it that matters,” said Ron Bonjean, a Republican strategist and former top GOP leadership staffer. “If he were to embrace his success and say, ‘Look--yes, I was at a firm that turned around businesses and that’s how I created a successful enterprise, grew jobs, and made money,’ he’d be in a much better spot.” Romney screwed up in how he handled questions about his tax returns initially, Bonjean said, but acknowledging his success head-on “will eventually defeat [Obama’s] class warfare argument.”
