Saturday, April 28, 2012

Working class voters remain cold to Mitt Romney. Is his tax plan to blame?

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Romney's plan would allow Americans who make over $1 million a year to keep more of their income, while raising taxes on those who make less than $30,000.

Mitt Romney has a demographics problem.

Really, multiple demographics problems. He’s had trouble connecting with evangelical voters, who catapulted Rick Santorum to a victory in Tennessee on Tuesday. Exit polls show that Santorum also won handily among independents and voters who describe themselves as “very conservative.”

Perhaps the most worrisome trend for Romney, however, is his poor performance among working class voters. Romney was edged out by Santorum among voters who make less than $100,000 a year, as well as voters who don’t have college degrees. Part of that may be due to his image as a well-heeled corporate titan. Part of it, however, may also have something to do with his tax plan.

The knotty tax code will no doubt prove to be one of the defining issues of the general election campaign. The battle over the extension of the Bush tax cuts last year, as well as the Congressional stand-off over the payroll tax earlier this year, provided a glimpse of how corrosive this debate can be. Republicans favor cuts to income and corporate tax rates across the board, while Democrats propose higher taxes on the rich and closing corporate tax loopholes in order to cut rates on companies doing business in America.

In years past, this sort of debate might have worked to the Republicans’ advantage. But with the economic downturn laying bare the stark wealth disparity between high earners and the middle class — even in the depressed economy of 2009, the top one percent of Americans controlled 25 percent more wealth than the bottom 50 percent combined — President Obama and the Democrats have made a calculated decision to put income inequality at the forefront of the campaign. And Romney’s tax plan could potentially make him vulnerable among the working class voters Obama is courting aggressively in battleground states like Michigan and Ohio.

Romney’s plan, unveiled last month, would make permanent the Bush tax cuts — but not the extension signed by President Obama, which also included several refundable tax credits for poor and working class Americans. The plan would cut income tax rates by 20 percent, cut the top corporate tax rate by nearly 30 percent and leave untouched the 15 percent rate on investments (which Romney himself has benefited from).

Romney claims the plan is deficit-neutral and just as progressive as the current tax structure. But in fact, a report by the Urban-Brookings Tax Policy Center found that, under Romney’s plan, middle-class Americans wouldn’t get nearly as large a tax cut as the nation’s highest earners. Those making over $1 million a year, for example, would see their after-tax income increase by 11.8 percent. Those making between $40,000 and $50,000 a year, by contrast, would see an increase of just 1.3 percent. And those making under $30,000 would actually have to pay more in taxes than they do now. Romney’s plan, essentially, would only make worse the already serious gap between the rich and the poor in America.

Romney also admitted in interviews on Wednesday that the plan’s impact on the deficit could not be measured, because several of its proposed revenue-raising provisions remain unspecified. The same report from the Tax Policy Center projected that the plan would actually add $4.9 trillion to the deficit over the next decade — more than the roughly $3 trillion the Bush tax cuts added to the deficit during Bush’s years in office.

Romney, of course, contends that the plan will spur job creation and allow Americans across income ranges to keep more of their hard-earned money. But the stark disparity in his tax plan’s treatment of high earners and working-class Americans might just make Romney’s demographics problem in states like Ohio and Michigan much worse.

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