Obama’s Tax Plan Forces Republicans To Choose Main Street Or Wall Street

President Obama’s proposal to give middle class and working class Americans a tax break has the GOP on the defensive. The president plans to pay for the tax cuts, by raising the capital gains tax to 28 percent on households making over half a million dollars annually. That rate is the same rate that the capital gains tax was during Ronald Reagan’s presidency.

President Obama plans to present his populist tax proposals on Tuesday during his State of the Union Address. The plan includes a series of tax breaks for low and middle-income families, while raising $320 billion in tax revenue from wealthy individuals and large financial institutions.

Republicans in Congress are balking at the measures, but the proposals enjoy support with rank-and-file Republican voters. 36 percent of Republicans favor raising the personal tax rate for millionaires. However, that percentage jumps to 53 percent, if Republicans are asked whether they support raising the income tax on those earning over a million dollars a year to 50 percent, “the same rate taxed under President Reagan.” While the impetus for a more populist tax policy is being driven the Elizabeth Warren wing of the Democratic Party, the tax increases simply restore Reagan era tax rates.

Republicans in Congress quickly pledged their allegiance to the wealthy, by criticizing Obama’s plan. Senator Marco Rubio (R-FL) complained that, “raising taxes on people that are successful is not going to make people that are struggling more successful.” A spokesman for Congressman Paul Ryan dismissed Obama’s plan as “not a serious proposal”. By aligning with the rich, Republicans risk alienating a large segment of the American people, including many self-identified Republicans. With Obama’s approval ratings on the rise, as he continues to move away from overcautious centrist complacency to bold left-center action, it is now the GOP that must struggle to establish an identity that average Americans can relate to.

With the richest one percent slated to hold over half the world’s wealth by 2016, Obama’s mildly redistributive tax proposals couldn’t come at a better time. Even the politically tone-deaf Mitt Romney is trying to reinvent himself as a poverty-fighting populist as he gears up for another presidential bid. Of course, unlike President Obama, Mitt Romney has not outlined how he plans to fight poverty, but his 2015 rhetoric is a far cry more populist than his 2012 broadsides against “class-envy” and the supposedly parasitic 47 percent. Still, his newfound populism will be a tough sell for voters as long as his car still rides in an elevator at home.

In the political chess game between the White House and Congress, Obama’s new tax proposals are smart politics. Insofar as they will benefit middle-class families and the working poor, they also make for good policy. Republicans in Congress are eager to fight everything Obama suggests, making it unlikely that they will latch onto his middle-class tax breaks. They almost certainly will not support raising taxes on the rich to help average working Americans.

Many rank-and-file Republicans might also resist any proposal put forth by Barack Obama. However, the middle and lower-income Republicans who can do the math, will find that the tax cuts help them. As America’s economic resurgence continues, spreading the benefits to regular Americans only makes sense. Congressional Republicans who stand in the way will once again demonstrate that their loyalty is confined to the ultra-wealthy. Their commitment to cutting taxes is reserved for helping out the moneyed class, while they have no problem giving ordinary Americans the shaft.


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