With Congress set to return to Washington, D.C. this week, the number one issue on the legislative agenda is tax cuts. Most Democrats want to extend some, but not all, of the tax cuts initiated by former President George W. Bush. Republicans, together with a few Democrats notably including Sen. Ben Nelson (D-Neb.), meanwhile hope to extend all of them.
The debate thus far has been framed primarily as a fight between those who want tax cuts for the middle class, versus those who want them for everyone (including wealthy Americans).
However, as with the health care debate, there is some prospect, political analysts say, that the debate could morph into a discussion of whether the Obama administration’s preferred policy would hammer one of the nation’s most coveted voting blocs– senior citizens– and in a circumstance in which Democrats have limited options for pushing back on Republican attacks.
According to IRS data analyzed and published in July this year by the Tax Foundation, “taxpayers over age 55 account for 71 percent of all dividend income earned. The lion’s share of dividend income – 48 percent – is earned by those over 65, and dividend income accounts for 6 percent of all the income earned by these taxpayers.”
Some opponents of Democratic plans to let some of the Bush tax cuts expire say that fact could be powerfully wielded by Republicans in states like Florida and Pennsylvania to hammer Democrats considered vulnerable by party leaders– and that it could give those Republicans an edge. Without a legislative fix, at the end of this year, the 15 percent tax rate currently applicable to dividends would rise to as high as 39.6 percent for some dividend recipients.
“It’s not ‘Death Panels,'” said one Republican strategist. “But it might be the equivalent of Medicare cuts.”
But unlike the debate over Medicare cuts, the fight over a possible hike in the dividend tax rate is one where Republicans have the advantage of advocating a position with which seniors are likely to agree on personal financial grounds, and one that is philosophically consistent with conservative principles.
“There’s no prospect of a hypocrisy charge here,” the above-quoted strategist continued. “This is very clean from Republicans’ standpoint.”
CNN exit polling data from the last midterm elections in 2006 showed that voters aged 60 and older accounted for 29 percent of the electorate that year, so observers say it is little surprise that seniors would represent a desirable demographic to bring on board now.
Indeed, many candidates and political organizations are already focusing their messages on themes designed to appeal to seniors. American Crossroads GPS– a 527 with which big names in GOP circles like Karl Rove and former RNC Chairman Mike Duncan are associated– has already run ads targeting Democrats over Medicare cuts in target states. Party committees have been quick to point out Democrats’ defenses for those same cuts in statements to the media, as well.
Clint Stretch, managing principal for tax policy at Deloitte Tax, told the Hill newspaper that he anticipates that Congress will pass a one or two year extension of the full spread of Bush tax cuts in a post-election “Lame Duck” session.
Peter Orszag, President Obama’s former budget director, recently called for a two year extension of all of the tax cuts as well.