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Is middle class safe from tax increase?

John Dimsdale Jan 19, 2010

Is middle class safe from tax increase?

John Dimsdale Jan 19, 2010


Kai Ryssdal: Barack Obama took office a year ago tomorrow with a whole pile of things on his plate. Some of them leftovers, some of them his own selections. Stimulate the economy, bail out banks and car companies, fix health care, develop a green economy and bring down the deficit — all without hitting up the middle class for more taxes. That’s a promise he repeated in his first State of the Union address.

PRESIDENT OBAMA: If your family earns less than $250,000 a year, a quarter million dollars a year, you will not see your taxes increased a single dime. I repeat: not one single dime.

We asked our Washington bureau chief John Dimsdale how the president is doing on that score a year on.

JOHN DIMSDALE: The last decade hasn’t been a great one for middle-class Americans. Ever since the end of the technology boom, stagnant wages and high unemployment have left them treading water. And the slow erosion of economic security drove voters like Judith Rucker, a community college teacher in Kansas City, to cast her vote for Barack Obama. She says Obama shares her values.

JUDITH RUCKER: I think that’s one place where Obama is absolutely the best person. I think we can trust his moral judgments.

But Rucker figures there’s no way to fix health care and climate change and pay off the debt without reaching into middle-class pockets. She believes Obama will make sure she’ll only have to pay her fair share. But her trust only goes so far. She’ll be looking for verifiable evidence that the pain is spread evenly.

RUCKER: In order to make me believe that it was being spread equally around, we should have facts and figures given to us not from special interest groups, but facts we could depend on that would show us the middle class is paying this much more, those in the upper class are paying this much more.

Polls show members of the middle class are gradually losing confidence that Obama’s proposals will spread the pain evenly. The latest national poll from Quinipiac University shows only 39 percent of people earning $50,000 to a $100,000 a year approve of the way he’s handling the economy. And that’s down from 57 percent last March.

Peter Brown is the poll’s assistant director.

PETER BROWN: Americans don’t think the recession’s over. Economists may think it is. Wall Street may think it is. But voters don’t. That’s heavily tied to the unemployment rate and the concern about job security.

White House aides say it’s too early to hold the president accountable for problems that have been years in the making. His goal is to make sure the middle class thrives in the recovery. But he has yet to turn around its fortunes. So far Obama has kept his promise to avoid tax increases on middle-income earners, but only by borrowing money to prop up banks and stimulate the economy.

CHRIS BERGIN: I can’t see how we can get out of the current state of our debt without asking the middle class to kick in.

Chris Bergin, the president of Tax Analysts, predicts Obama will have to break his promise. He says in the future, several White-House-backed proposals will hit middle-class pocketbooks.

Take health care. Obama supports a hefty excise tax on expensive insurance plans. Despite an agreement to delay the impact on many union health care plans, Rich Trumka, the president of the AFLCIO, says that tax is going to hurt.

RICH TRUMKA: Instead of taxing the rich, the Senate bill taxes the middle class by taxing workers’ health plans.

And Chris Bergin says the president’s proposals to charge large banks a fee for the TARP bailout and to make polluting fuels more expensive will most likely be passed along to middle-class customers. Some will argue these costs aren’t taxes, but Bergin says don’t be fooled.

BERGIN: If it takes money out of the middle-class’s pocket, and it goes to the government, I call it a tax.

How the middle class views the fairness of taxes will make or break the Obama administration’s future, says Jim Kessler at the nonpartisan think tank, Third Way.

JIM KESSLER: This is the group, more than any other, that swings elections. You can look at them and say if you lose them by one or two points, you probably lose the election by one or two points. They really are the barometer.

Kessler says Obama’s economic challenge is similar to the one that faced Ronald Reagan in 1982. A long and deep economic downturn had left the middle class anxious and cost Republicans seats in Congress that year. But the middle class stuck with Reagan’s vision that better times were right around the corner. The economy improved, and he won a landslide reelection two years later.

In Washington, I’m John Dimsdale for Marketplace.

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