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Middle Class Tax Anthem Hits a Sour Note

Won’t get fooled again.

12:00 AM, Aug 5, 2010 • By GARY ANDRES
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It sounded very easy in theory. With the biggest tax increase in history set to go into effect on January 1, 2011, Democrats were poised to win the middle class rock heroes award.

Middle Class Tax Anthem Hits a Sour Note

The song had all the subtlety of a Pete Townshend guitar riff. Pass a bill before the end of the year extending current tax law for everyone except those nasty “rich” folks (individuals earning more than $200,000 per year and families with incomes above $250,000) and bang! 

Then, just hitch a ride on the shoulders of grateful fans in the mosh pit to electoral victory.  

Simple, right?  Not really.  House Democrats adjourned for their summer recess last week, leaving town with a bad case of confusion about how to address future tax policy. But one thing is clear: Based on Speaker Pelosi’s comments, her party will stop at nothing to protect their caucus from politically tough votes this fall, even if it means kicking the can past the election and abusing the spirit of the Constitution.

Pelosi shared some revealing comments last week, signaling for the first time that something was askew. In an article by Politico’s David Rodgers, Pelosi admitted that the House would forgo its Constitutional prerogative to initiate tax bills. On the question of whether to let a host of taxes snap back to pre-2001 levels, Pelosi said:  “The Senate is supposed to go first on this, and the president will be taking the lead. When we come back, we’ll see....Right now, the ball is in their court.”

Actually the Senate is not supposed “to go first.” Article 1 Section 7 Clause 1 of the U.S. Constitution reads: “All bills for raising revenue shall originate in the House of Representatives.”  But the Speaker knows that. 

Her comments were more a reflection of political realities than constitutional ignorance.

Yet Pelosi’s acknowledgement that the House would wait for the Senate to diffuse the ticking tax time bomb revealed something else – House Democrats' commitment to avoid casting a tough political vote before the election, only to see the Senate drop it like a hot frying pan. 

Washington veterans remember the phrase, “getting BTU’d.”  In May of 1993, House Democrats cast a politically dicey vote to raise energy prices called the BTU tax. The Senate never took up the measure and vulnerable House Democrats felt like screaming a la Roger Daltrey.

Many lawmaker believe they face a similar fate due to their cap-and-trade vote last summer, another issue on which the Senate decided to punt after facing fourth and long political odds earlier this year.

Shielding caucus members from inordinate political risk is one of a Democratic congressional leader’s principal tasks. Over the past 18 months the Speaker’s followers have shouldered some heavy political baggage – including tough votes on spending, health care, and cap-and-trade.

“They’re done,” a Democratic lobbyist told me referring to the congressional schedule. “Between now and the election, no more tough votes, especially on things that don’t go anywhere in the Senate.”

And with at least three Democratic Senators – Bayh of Indiana, Conrad of North Dakota, Lieberman of Connecticut, and Nelson of Nebraska – indicating they don’t believe now is the time to raise taxes on anyone, a House-passed middle-class protection plan might never make it through the upper body.

So House members, singing the Who classic, “Won’t Get Fooled Again,” will just wait and see what the Senate and President Obama cook up.

From a raw political standpoint, raising taxes on high wage earners seems pretty effortless. But here’s where the president and congressional Democrats get into trouble: Their arguments are intellectually dishonest.

True, individuals making $200,000 or more will pay higher taxes, but so will a lot of small businesses that file, for example, as sole proprietors.  A Republican House Ways and Means Committee aide told me raising the top two tax rates would hit 50 percent of small business income. Many of these entrepreneurs are the ones Obama and the Democrats hope will provide new jobs and expanded economic growth.

Increasing their costs of doing business as GDP decelerated over the past three quarters strikes many as inking a suicide pact with economic growth. 

House Democrats and their leaders see great peril in raising taxes, particularly if the Senate ultimately demurs.  Speaker Pelosi and her colleague may still try to win the rock hero award, but only after taking a peak inside the envelope that includes the verdict rendered by the upper body. And the Senate may withhold that information until after the November elections.  Won't get fooled again indeed. It’s enough to make Keith Moon turn over in his grave.

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