No Lip Service: Dems Trade Higher Taxes for Social Programs

May 29, 2007 — -- The Democratic presidential candidates want to raise your taxes.

Most of them aren't exactly advertising that fact when they talk about their plans for health care, the environment and education. But for a party that has long feared political fallout when talking about taxes, the Democrats' 2008 crop of presidential contenders is showing remarkable frankness in talking about the need for additional revenues to fund their priorities.

Sen, Barack Obama, D-Ill., became the latest candidate to call for higher taxes Tuesday, when he unveiled his plan for universal health coverage. He is calling for the tax cuts pushed by President Bush to expire in 2010 for upper-income earners -- an effective tax hike for more than 1 million taxpayers -- and is proposing a new tax on small businesses that don't provide health care to their employees.

"We now face an opportunity -- and an obligation -- to turn the page on the failed politics of yesterday's health care debates," Obama said in unveiling his health care plan in Iowa. "To help pay for this, we will ask all but the smallest businesses who don't make a meaningful contribution today to the health coverage of their employees to do so by supporting this new plan. And we will allow the temporary Bush tax cut for the wealthiest Americans to expire."

Obama joins former North Carolina Democratic Sen. John Edwards in calling for higher taxes to help fix the nation's health care woes. Edwards wants to roll back the Bush tax cuts for Americans making more than $200,000 a year, and said he would also consider raising capital gains rates and Social Security taxes.

In addition, Sen. Christopher Dodd, D-Conn., is proposing a "carbon tax" that would be assessed on businesses based on how much pollution they generate, with the money to be funneled into a trust fund for renewable energy technologies. Though individuals would not be assessed any new taxes, businesses would almost certainly pass on some of their costs to consumers, leaving Americans indirectly paying new taxes.

"Taxes are becoming part of the debate," said Leonard Burman, director of the Tax Policy Center and a senior fellow at the Urban Institute, a liberal policy group. "You know they're going to be attacked for it. But people still want government to do things for them, and the question is whether the candidates can convince people that this is something that's worthwhile for them."

Campaign vows of higher taxes have been essentially off-limits for Democratic presidential candidates since 1984, when Democratic nominee Walter Mondale hurt his chances against President Reagan with a famous line at the Democratic National Convention that was widely interpreted as a pledge of higher taxes.

"Mr. Reagan will raise taxes, and so will I. He won't tell you. I just did," Mondale said.

While presidential candidates, including Bill Clinton in 1992 and John Kerry in 2004, occasionally talked about paying for their priorities with higher taxes, they carefully calibrated their proposals with populist rhetoric about making the wealthy pay their fair share.

Even so, in 2004, President Bush hammered Kerry for saying he would roll back tax cuts for the rich, in a stark display of the political peril surrounding any discussion of higher taxes.

"Tax the rich -- you know what that means? They dodge, you pay," Bush said in a typical campaign refrain, part of his campaign to brand Kerry as a Massachusetts liberal.

Though some recent polls have shown Americans willing to pay higher taxes for new services, Democrats need to handle the issue carefully, said Martin Frost, a former Democratic congressman from Texas.

Specifically, they need to convince voters that a new tax would go for a targeted service instead of funding a growing bureaucracy, Frost said. And candidates who talk about higher taxes must be able to parry inevitable Republican charges that they are "tax-and-spend liberals."

"Selling any type of increase in taxes, even just on the wealthy, is not easy for Democrats," Frost said. "The public wants something done about something like health care, but you have to overcome skepticism that a new tax will be used for a single purpose. It's not clear at this point if the public is willing to pay more taxes. They'd like to examine all other options first."

Some Democrats, including Sen. Hillary Rodham Clinton, D-N.Y., and Gov. Bill Richardson, D-N.M., say their plans would allow more people to have to health care without paying higher taxes.

And the Democrats who are talking about raising taxes are doing so with extreme caution. The Obama campaign is quick to note that many businesses will save money on health care costs, notwithstanding the new tax on those who don't provide health coverage, through federal assistance in high-cost cases.

The Obama campaign has released a fact sheet boasting that the price tag of its proposal -- between $50 billion and $65 billion a year -- can be covered "without new taxes on the overwhelming majority of U.S. taxpayers." According to the Urban Institute, less than 1 percent of taxpayers would be affected if the lower tax rates on the top two income-tax brackets are allowed to return to their previous levels after 2010.

Dodd aides concede that taxpayers may have to pay more for many products under his "carbon tax" plan. But they say such costs will be outweighed by tax cuts on items such as hybrid vehicles and by increased energy efficiency of products the new tax would help develop.

"The cost they would save far outweighs the few cents a gallon extra they may have to pay for gasoline," said Amos Hochstein, the Dodd campaign's policy director. "The point of this tax is to create a pot of money that would directly help consumers."

Edwards, who is running a campaign aimed at eradicating poverty, has been most outspoken in his call for higher taxes, casting his proposal as the only realistic way to reach the uninsured.

"I think for me, as opposed to the additional tax relief for the middle class, what's more important is to give them relief from the extraordinary cost of health care, from gasoline prices, the things that they spend money on every single day that are escalating dramatically," Edwards said in last month in an interview with The Associated Press.