Are Democrats Selling Themselves Short on Taxes?

Democrats aren't telling the full truth about their proposal to extend the Bush tax cuts for middle-class Americans while letting tax cuts for the wealthy expire. But instead of some nefarious plot to hide the real cost, Democratic talking points are actually selling their own party short, in a way that drives some party strategists crazy.

Case in point: The message Democrats have conveyed is that their plan, which the Senate passed on a party-line vote on Thursday, would preserve tax breaks for households making below $250,000 annually. "Yesterday, the Senate voted to ensure that 98 percent of Americans don't see their taxes go up next year," Obama said on Thursday at the White House. "It was the right thing to do. It will provide certainty and security to families that are already feeling pinched."

That statement doesn't capture the full picture. In fact, the Democratic proposal would extend tax breaks to every American. Those households making less than $250,000 a year wouldn't see any change in their tax rates. Those who make more than $250,000 a year wouldn't see any change in the tax rate on their first quarter-million dollars, either. It's not as if some Americans get a tax break and others don't--everyone, plain and simple, would get a tax break.

Of course, that still means those who make more than $250,000 a year would pay more in taxes. But it's an important distinction: They would only pay more on the amount they earn above $250,000. So, for example, if a couple makes $350,000, they're paying the lower rate on the first quarter million and the higher rate on the second $100,000. The second $100,000 is the only part of their income that falls into that higher tax bracket.

Democrats have always been skittish about being labeled tax-and-spend liberals, which means that their candidates usually avoid the topic altogether. That continues to be true, even though their tax plan, for once, has more public support than the Republican plan.

Six in 10 Americans said it is very important to extend the cuts for families making less than $250,000 annually, while just 40 percent said it’s very important to extend all the tax breaks, according to a United Technologies/National Journal Congressional Connection Poll conducted earlier this month.

Party strategists admit their side is neither comfortable with, nor particularly good at, talking about taxes. "Despite the fact that we've made [a] significant increase when it comes to polling on taxes, the fact is Democrats still don't know how to talk about them," groused one longtime party operative, expressing a view common around Washington.

It's clear that the party's messaging on the Bush tax cuts, from Capitol Hill to the White House, has been a conscious decision to focus on the contrast between the middle class and wealthy millionaires Democrats say aren't paying their fair share. What's not clear is whether that's the most effective way to communicate the party's position.

"What they've chosen is a populist argument over a fairness argument," said Steve McMahon, the Democratic messaging guru. "I think you can actually make a populist argument by saying, 'When was the last time you got the same tax cut, dollar for dollar, penny for penny, as a millionaire? When was the last time you got treated exactly like a millionaire?'

"Another way is to talk about the progressive nature of the tax code, and the progressive nature of this tax cut, so that everybody making up to $250,000 [a year] gets the same tax cut," McMahon continued. "It's just that for people who don't make $250,000, it means a lot more, and it's the only fair way to do it."

The most obvious drawback to describing the Democratic proposal is one of complexity. Start talking in depth about the tax code and watch your audience's eyes quickly glaze over. And the Democratic proposal that passed the Senate this week would raise taxes on income above the $250,000 ceiling, meaning Republicans can accurately characterize the bill as a tax hike on some Americans.

What's more, some Democrats embrace the class-warfare argument; they like to contrast the middle class with millionaires and billionaires. And they don't mind playing up the upper-income tax-cut expiration, which a White House report issued this week says would produce $850 billion in revenue over the next decade.

"Allowing these tax cuts to expire is an essential component of the president’s overall plan for balanced deficit reduction," the report says.

But making the more complicated argument--or at least sticking to the topline assertion that everyone gets to keep at least some tax break--might be worth it. "It's a difference of emphasis. It's not so much us versus them as it is, 'We're standing with you.' Us versus them is inherently negative, and standing up for the middle class is inherently positive," McMahon said.